LUMS Manufacturing Inc. owns a large factory building that it purchased in 2016. At the time of
Question:
LUMS Manufacturing Inc. owns a large factory building that it purchased in 2016. At the time of purchase, the company decided to apply the revaluation model to the property; the first revaluation occurred on December 31, 2018. On January 1, 2019, the recorded cost of the building was $1,200,000, and the accumulated depreciation was nil, as the company applies the revaluation model by eliminating accumulated depreciation. The balance in the revaluation surplus account on January 1, 2019, was $150,000.
As well, the company decided on this date to obtain annual appraisals of the property in order to revalue it at every reporting period. The appraised values obtained over the next three years were as follows:
Date Appraised Value
December 31, 2019 $1,250,000
December 31, 2020 $1,000,000
December 31, 2021 $1,150,000
Required: Prepare all the required journal entries for this property for the years ended December 31, 2019, to 2021. Assume that the building is depreciated on a straight-line basis over 30 years with no residual value.
