Reference no: EM133162775

Question - In April 2005, ABC Corporation acquired an eight-storey building for the purpose of earning rental income and capital appreciation at $25 million. The cost of freehold land was $5 million and the building was $20 million. The building was initially estimated to have a useful life of 50 years. The company depreciates the building using the straight-line method based on a monthly basis.

Beginning April 2010, the office building was revalued upward at $32 million. The amount attributable to land and building was $9 million and $23 million respectively. Given the rising property value in 2011, the Board of Directors had decided to sell the office building to realise a capital gain. The property was sold at the end of March 2012 for $35 million.

Required -

i) Prepare the journal entry to record the revaluation and elimination of revaluation at year-end.

ii) Compute the gain or loss on disposal of the office building and provide the journal entry for the revaluation reserve upon disposal of the office building.