Prepare necessary adjusting entries to correct the errors

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Point 1: GHL purchased a factory site in Malaysia on 1 April 2019 with intention for industrial use. Land prices in the area had increased significantly in the years immediately prior to 31 March 2020. Nearby sites had been acquired and converted into residential use. It is felt that, should the GHL's site also be converted into residential use, the factory site would have a market value of $27 million. $1.5 million of costs are estimated to be required to demolish the factory and to obtain planning permission for the conversion. GHL was not intending to convert the site at 1 April 2019 and had not sought planning permission at that date. The current replacement cost and carrying amount of the factory site are correctly calculated as $25.1 million and $28 million respectively as at 31 March 2020 before revaluation. Fanny did not reflect the change in fair value of the factory site even the factory site is measured using the revaluation model under HKAS 16.

Question 1: Prepare necessary adjusting entries to correct the errors in the financial statements of GHL for the year ended 31 March 2020 in accordance with relevant HKFRSs.

Reference no: EM132504650

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