AT Travel Limited acquired a two$-$story building for use as an office on June $30,2022,$ at $$2$ million. The building is expected to have a useful life of $20$ years and a residual value of $$100,000.$ The company used the straight$-$line method to depreciate the building. On July $1,2023,$ the company paid $$38,000$ for the completion of the newly built car park lots at the back of the building. The market value of the building was estimated at $$2\mathrm{.}2$ million and $$2\mathrm{.}5$ million on June $30,2023$ and $2024,$ respectively

$$ Using the facts from above, assume that AT Travel Limited decided to rent out the building on June $30,2024,$ to an unrelated party. The company used the fair value method to account for its investment property. The market value of the building was estimated at $$3$ million on June $30,2025.$ The company subsequently sold the building for cash of $$2\mathrm{.}8$ million on July $31,2025.$

 

 

$$ Required

$1.$ Discuss the accounting for change in use of property from property, plant, and

equipment to investment property on June $30,2024.$

$2.$ Show the journal entries to record the change in use of the building and its subsequent disposal assuming that the company was using the cost method for the building prior to its change in use.

Answer rating: 100% (QA)

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