Due to its rapid expansion, the management of Skigh Limited (Skigh) made a decision to purchase a new building for its office space. A new building was purchased in an upcoming commercial area, with the following incurred and paid in the beginning of June 2019: • $900,000 which was the purchase price of the building. • $20,000 for lawyer's fees in relation to the purchase • $5,000 for relocating some furniture and equipment from the old building to the new building. The building was estimated to have a useful life of 50 years and a residual value of $100,000. The straight-line depreciation method is used. Skigh uses the revaluation model for its buildings. Due to the popularity of the commercial area in which the building was purchased, the fair value of the building increased and was estimated to be $1,200,000 as at 30 June 2020. Based on the company policy, the building was revalued to its fair value on this date. At this time, the remaining useful life is assessed to be 49 years with a residual value of $150,000. A few months after the revaluation, the commercial area was deemed to be a flood prone area. This was an indication that an impairment may have occurred, and an impairment review was caried out. It was determined that the fair value of the building on 30 June 2021 was $820,000, the cost to sell the building was $22,000 and the value in use was $800,000. After the recognition of impairment on 30 June 2021, the remaining useful life of the building was determined to be 45 years and the residual value was estimated as $90,000. On 30 June 2022, the building was sold for $730,000. 

Required: Part A Show all journal entries, in relation to the building, for the years ended 30 June 2020, 30 June 2021 and 30 June 2022.

Answer rating: 100% (QA)

To prepare the journal entries for the years ended 30 June 2020 30 June 2021 and 30 June 2022 we need to consider the events related to the building i... View the full answer