STUDY CASE

Problem 8.1

During 2009, the following events occurred in relation to jessica's Revals Ltd, a
property developer and real estate valuation firm.

(a) Jessica's Revals Ltd purchased land from Denis Gibson for $1 000 000. This land
was adjacent to, and otherwise identical to, the block of land that Jessica's Revals Ltd
had bought three years ago for $1 000 000 and had then spent an extra $50 000
improving to now have the same value as the land bought from Gibson. Record the two
blocks of land in the accounts of Jessica's Revals Ltd.

(b) lessica's Revals Ltd bought 500 ordinary shares in Charmers Construction Ltd for
$18 000 cash on 7 September 2009. This was 5 per cent of the shares on issue by
Charmers Construction Ltd. The shares are held for investment purposes. The parcel of
shares had a market value of $16 000 at 31 July 2010. Record all the transactions that
Jessica's Revals Ltd should record in relation to the shares.

(c) At 31 July 2009, Jessica's Revals Ltd valued its current assets at $20000 above
carrying amount and its fixed assets at $600 000 above carrying amount. In both cases,
the valuations were based on market values. How should the firm account for the
increase in values?

(d) Jessica's Revals Ltd purchased a development site for $81 000 and immediately sold
that site to Kathy Pratt Real Estate for $130000. The payment consisted of a 10-vear
non-interest-bearing note for $130 000. The first equal payment ($13 000) is due one
year after the sale. The normal rate of interest for such a loan is 10 per cent per annum.
Record the sale of the land.

(e) lessica's Revals Ltd bought bricks with a recommended retail price of $18 000 and a
cash price of $16500. The firm paid for the bricks by paving part of the roadway leading
into the brick manufacturing plant. The cost of the paving was $12000 and the regular
contract price to provide the paving was $17000. Record the transactions.
(f) Jessica's Revals Ltd issued 1000 of its ordinary shares in payment for a tract of land.
The market price of the shares was $83 per share at the time of acquisition but the seller
had offered to sell the land for $82 000 cash. What journal entry should the firm make
to record the land purchase

Berdasarkan transaksi diatas mahasiswa diminta untuk :

1. Mencatat dalam jurnal yang tepat

2. Mengidentikasi setiap transaksi diatas apakah dalam konsep
Teori liabilities atau equity berikan interprestasi yang luas dengan memahami
defines maupun karakteristik dari konsep teori tersebut.

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