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Bubble wished to expand its overseas operations and on 1 May 20X5 acquired an overseas
property with a fair value of 58.5 million dinars. In exchange for the building, Bubble paid
the supplier with land which Bubble had held but for which it had yet to determine its use.
The carrying amount of the land was $5 million but it had an open market value of $7
million. Bubble was unsure as to how to deal with this transaction and so has transferred $5
million from investment properties to property, plant and equipment. The transaction has
In the answer ,they’ve given that the correcting entry is
Dr PPE $2m
Cr P/L $2m
But I was thinking that
Since a wrong entry was passed which is
Cr Inv property 5m
THe correcting entry should be
Dr Inv property 5m
Cr Ppe 5m
and then another entry to bring the asset to fair value
Dr inv 2
Cr p/l 2
Please help me regarding this.
The new building is part of the operations – not an IP, so it is correctly classified as PPE.
In the exam don’t use journals instead of explanations.