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Date

Account Titles and Explanation

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Date

Account Titles and Explanation

Debit

Credit

Mar. 1, 2017

On March 1, 2017, Bridgeport Corp. acquired a 10-unit residential complex for $1,274,580, paid in cash. An independent appraiser determined that 75% of the total purchase price should be allocated to buildings, with the remainder allocated to land. On the date of acquisition, the estimated useful life of the building was 27 years, with estimated residual value of $324,670. Bridgeport estimates that straight-line depreciation would best reflect the pattern of benefits to be received from the building. Fair value of the complex, as assessed by an independent appraiser on each date, is as follows:
Date Fair Value December 31, 2017 $1,321,630 December 31, 2018 $1,254,600 December 31, 2019 $1,222,710
The complex qualifies as an investment property under IAS 40 Investment Property. Bridgeport has a December 31 year end.

Explanation / Answer

Purchased on march 1,2017

Land A/C – Dr 318645

To Cash A/C – 1274850

(being Complex purchased)

Depreciation for 2017 = 23380*10/12 it would be for 10months since its purchased on 1st march

=19483

Depreciation A/C – Dr 19483

To Building A/C – 19483

(being building depreciated)

Dec31,2017

Book VALUE OF building = 955935-19483= 936452

Land = 318645

Upward Valuation = Building = 991223- 936452= 54771

Upward Valuation = Land = 330408-318645= 11763

So therefore

Building A/C – Dr 54771

Land A/c – Dr 11763

To Profit and loss A/C – 66534

(being complex valued at fair value at year end)

2018

Depreciation = 25637

Depreciation A/C – Dr 25637

To Building A/C – 25637

(being Depreciation charged on building )

Book VALUE OF building = 991223- 25637= 965586

Land = 330408

Downward Valuation = Building = 940950- 965586= -24636

Downward Valuation = Land = 313650-330408= -16758

So therefore

Profit and Loss A/c – Dr – 41394

To Building A/C – 24636

To Land A/C 16758

(being complex valued at fair value at year end)

2019 Depreciation

Depreciation A/C – Dr 24651

To Building A/C – 24651

(being Depreciation Charged to building)

Fair Valuation

Book Value

Building = 940950-24651= 916299

Land = 313650

Upward Valuation

Building = 917033-916299= 734

Land = 305678-313650= -7972

So therefore

Building A/C – 734

Profit and loss A/c – 7238

To Land A/C – 7972

(being Complex Fair valued )

2017 Building Land Total 75% 25% Purchase price 955935 318645 1274580 Residual
Value -324670 Useful
years 27 Purchase
value less
residual
value 631265 Depreciation 23380 2018 Fair value 991223 Residual
Value -324670 Useful Life 26 Purchase
value less
residual
value 666553 Depreciation 25637 2019 Fair value 940950 Residual
Value -324670 Useful Life 25 Purchase
value less
residual
value 616280 Depreciation 24651

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