Question

In 2XX7, Oz Ltd (DL) bought an abandoned lot of land on the main street in Sheffield, England for 200,000 British Pounds Sterling. On December 31. 2X10, the land was determined to be impaired and written down to 50,000 Pounds. The Great Recession ends and on December 31, 2X12, the land appreciates in value to 100,000 Pounds. The journal entry for this land on December 31, 2X12 is:

Answer 1

Journal Entry

December 31, 2X12

Dr. Land Account ______50,000 pounds

Cr. Appreciation on Land 50,000 pounds

Step-by-step explanation:

As Land is recorded at the value of $50,000 and it is needed to be appreciated on December 31,2X12.

The appreciation will increase the value of the land so the land account will be debited as it is a fixed asset account that has debit nature.

On the other hand, the appreciation on the land account will be credit because it is an unrecognized income/gain account that will be reported as other comprehensive income.

Adjustment = Appreciated Value - Carrying Value = 100,000 pounds - 50,000 pounds = 50,000 pounds

Note: As depreciation is not applicable on the land so, the carrying value on December 31, 2X10 will be the same on December 31,2X12 before adjustment.