Garrett Corporation paid $200,000 to acquire land, buildings, and equipment. At
ID: 2426757 • Letter: G
Question
Garrett Corporation paid $200,000 to acquire land, buildings, and equipment. At the time of acquisition, Garrett paid $20,000 for an appraisal, which revealed the following values: land, $100,000; buildings, $125,000; and equipment, $25,000.
Required:
1. What cost should the company assign to the land, buildings, and equipment, respectively? 2. Assume that Garrett uses IFRS and chooses to use the revaluation model to value its property, plant, and equipment. At the end of the year, the book value of the land, buildings, and equipment are $88,000, $104,000, and $18,000, respectively. The company determines that the fair value of the land, buildings, and equipment at the end of year is $110,000, $106,000, and $15,000, respectively. Prepare the journal entries that Garrett should make to value its property, plant, and equipment.Explanation / Answer
1) The cost that the company should assign is the cost of the property purchased therefore the cost would be
Land :100000 Building 125000 Equipment 25000
2) journal entries
a) Land A/c $22,000
To revaluation surplus $22,000
b) Building A/c $2000
To revaluation surplus $2000
c) Revaluation surplus A/c Dr $3000
To Equipment A/c $3000
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