At travel limited acquired a two-story building for use as an office on june 30,2012 at $2million. The building is expected to have a useful life of 20 years and a residual value of $100,000. The company used the straight-line method to depreciate the building. On1 july,2013 the company paid $38,000 for the completion of the newly built car park lots at the back of the building. The market value of the building was estimated at $2.2million and $2.5 million on June30,2013 and 2014 respectively
Assume that AT travel Limited decided to rent out the building on June 30,2014 to an unrelated party. The company used the fair value method to account for its investment property. The market value of the building was estimated at $3million on June30,2015. The company subsequently sold the building for cash of 2.8 million on July31 2015
1. Discuss the accounting for change in use of property from propert, plant and equipment to investment property on June30 2014
2. show the journal entries to record the change in use of the building and its subsequent disposal assuming that the company was using cost method for the building prior to its change in use.