Decide to continue using the cost model for equipment

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Storm Ltd acquired an item of equipment on 1 July 2013 at a cost of $500,000. On 30 June 2014, Storm’s directors decide to continue using the cost model for equipment. They elect to depreciate the equipment acquired on 1 July 2013 using the straight-line method, over its useful life of five years. The estimated residual value is $50,000. The directors then decide to adopt the revaluation model for equipment from 1 July 2014. They determine that the fair value of this item of equipment on this date is $465,000. The useful life is revised on this date – estimated to be six years from 1 July 2014. The estimated residual value remains unchanged. On 30 June 2015, Storm’s directors estimate that the fair value of the item of equipment does not differ materially from its carrying amount. On 30 June 2016, Storm’s directors estimate that the fair value of the item of equipment is $220,000. The item of equipment is sold on 30 September 2016 for $210,000. Assume a tax rate of 30%.    Prepare journal entries to account for all transactions that took place during the period 1 July 2013 to 30 September 2016, including entries for the acquisition of the equipment, depreciation, revaluations and its disposal. Show all relevant dates, narrations and workings.

Reference no: EM131257584

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