Prepare all required adjusting journal entries for year-end

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Reference no: EM132608956

Zinnia Inc., a publicly listed company, purchased a warehouse on January 1, 2019 for $1,550,000. The company

  • has chosen to use the revaluation model to account for its structures and revalues them annually.
  • uses straight-line depreciation over the asset's 8-year useful life with no residual value.

The asset's fair values were as follows:

Dec 31, 2019: Equal to its carrying amount.

Dec 31, 2020: $1,368,000.

Dec 31, 2021: $1,047,000.

Instructions

Question 1: Assuming Zinnia uses the asset adjustment (elimination) method for revaluation, prepare all required adjusting journal entries for the year-end's of 2019, 2020 and 2021.

Question 2: Assume your uncle has an investment property in Kelowna and that recently real estate prices have taken off in the interior. Explain to him when the revaluation method can be used.

Question 3: Repeat the journal entries for 2020 assuming that due to a change in the economy and the company's business plan, the warehouse is designated as "held for sale" as of January 1, 2020 and though not used in 2020 was still held by Zinnia on December 31, 2020.

Reference no: EM132608956

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