Calculate the depreciation expense for the equipment

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Reference no: EM132825373

Question - Robin Limited ('Robin') purchased a piece of equipment and it was fully operational as at 1 February 2019. The equipment was purchased for $320,000. In addition to the purchase price, Robin spent $40,000 to transport the equipment on site and $60,000 of engineering fees to set-up the equipment. It had an estimated useful life of 10 years and an estimated residual value of $60,000. Each year $6,000 is spent on repairs and maintenance. On 1 July 2021, $80,000 was spent on a major upgrade after which the equipment had an expected useful life of 5 years from the date of the upgrade with a revised residual value of $38,000. On 1 March 2023, the equipment was sold for $120,000 cash. Robin's financial year end balance date is 30 June and Robin uses straight-line depreciation.

Required -

(i) Calculate the depreciation expense for the equipment for the year ending 30 June 2019. (Show all workings).

(ii) Record the journal entry for the $80,000 upgrade to the equipment and the journal entry to record the depreciation on the equipment for the year ending 30 June 2022. (Show all workings).

(iii) Record the journal entries required for the disposal of the equipment as at 1 March 2023. (Show all workings). (iv) Discuss the key aspects of the 'cost model' and 'revaluation model' for non-current assets, and highlight the differences between them.

Reference no: EM132825373

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