Reference no: EM133137221

Question - In April 2006, 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 2011, the office building was revalued upward at $32 million by an independent professional valuer. The amount attributable to land and building was $9 million and $23 million respectively. Given the rising property value in 2012, 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 2013 for $35 million.

Required -

1. Show the detailed computation arising from the revaluation of the building in April 2011.

2. Prepare the journal entry to record the revaluation and the elimination of revaluation at year end.

3. 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.

4. Provide FOUR (4) methods to determine the fair value of an investment property.