ABC Ltd is in the business of providing management consultation services in Parnell area. ABC bought a property on 1 July 2012 for a cost of $1,500,000. The property consists of land and building. The value of the land is $800,000 at time of purchase. The property is used as offices and seminar rooms. ABC renovates the property in order to make it suitable for its operation. The cost of renovation is $80,000. The renovation is completed in 2 months after the purchase. ABC has a balance date of 30 June.

1. Determine the cost of the property to be recorded in the accounts. (Explain your answer with reference to NZ IAS 16).

2. Assume ABC depreciates the building part of the property on a straight-line basis. Depreciation is $40,000 each year for the building. The company depreciates its PPE to the nearest month. On 1 July 2013, the property is revalued to $1,700,000, of which the land portion appreciated by $100,000. Prepare journal entries to reflect the revaluation for both land and building of the property.

Requirement:
You must cite appropriate paragraph number of NZ IAS 16 in your answer.You do not have to copy down the relevant standards, but you need to use your own words to explain how the standards apply in the questions above

1. Land 800,000
Buildiing 780,000

2. Land 100,000
Revaluation Reserve 100,000

Builings 860,000
Accumulated Depreciation 40,000
Revaluation Reserve 900,000

I am not aware of NZ stanards

Can u please explain how you got $860,000 for buildings thanks.

Buildings:

Purchase price 700,000
Renovation cost 80,000
Total cost 780,000
Depreciation (40,000)
Net Book Value 740,000

Revaluation value 1,600,000
Net book value 740,000
Increase in reserve 860,000

Hope it is clear and thanks for your response

[QUOTE=rehmanvohra;3544464]

Buildings:

Purchase price 700,000
Renovation cost 80,000
Total cost 780,000
Depreciation (40,000)
Net Book Value 740,000

Revaluation value 1,600,000
Net book value 740,000
Increase in reserve 860,000

Hope it is clear and thanks for your response