QUESTION:

ABC Ltd. owns an investment property that was valued at $500,000 under the cost model. However, the property market has gone up, and the fair value of the investment property is now $700,000. Under IFRS 13, the company is required to measure the investment property at fair value.

ANSWER:

The journal entry to record this is:

DR. Investment property (asset) $200,000 CR. Gain on revaluation of investment property (OCI) $200,000

Here's the tabulated working calculation for the journal entry to record the revaluation of the investment property:

To record the revaluation of the investment property, we need to debit the investment property account for the increase in fair value ($700,000 fair value less $500,000 carrying value under the cost model), and credit the gain on revaluation of investment property account for the same amount. Since the gain is recognized in other comprehensive income (OCI) under IFRS 13, the gain on revaluation of investment property account is credited in OCI.

The journal entry would be:

Debit investment property (asset) for $200,000

Credit gain on revaluation of investment property (OCI) for $200,000

Therefore, the journal entry to record the revaluation of the investment property would be:

Investment property (asset) - $200,000

Gain on revaluation of investment property (OCI) - $200,000