Identify when a valuation of property plant & equipment

Reference no: EM132970551

Deg Ltd has a policy of adjusting the net book value of its non-current assets to fair value if the two values are significantly different. The only asset that required revaluing prior to 1 July 2008 was land which had been re-valued downwards by $100 000. The following selected account balances are taken from the general ledger of Deg Ltd on 30 June 2008. (Calculations in this question should be to the nearest dollar.)

DR CR
Land 370 000
Equipment 430 000
Accumulated depreciation - Equipment 64 500

Equipment is being depreciated on a straight-line basis over 10 years with an expected residual value of $10 000.

The following events took place during the year ended 30 June 2009.

2008
3 July Purchased Motor Vehicles on credit for $140 000 plus $10 000 was paid in cash to cover transport costs and $1200 in cash for registration.

2 July Paid $30 000 to upgrade the new vehicles so that they were suitable for use by Deg Ltd. A reducing balance depreciation rate of 20% will be used for calculating depreciation for the new vehicles.

18 Sept Spent a total of $4 300 cash for maintenance and repairs on the motor vehicles. Fuel expense was paid $10 500.

2009
2 Jan Traded-in the existing equipment for new equipment costing $1500 000. Deg Ltd received a trade-in of $600 000 on the old equipment and the balance was paid for by cash. The new equipment is to be depreciated on a straight-line basis over 5 years with an expected residual value of $400 000.

30 June Calculate Depreciation Charge for Motor Vehicles and for Plant and Equipment

30 June After assessing the fair values of the non-current assets of the business land needs to be revalued to a fair value of $920 000.

Required

a. Prepare entries in general journal form to record the events described above.

b. Identify when a valuation of Property Plant & Equipment is sent to the Asset Revaluation Surplus account, and explain why.

Reference no: EM132970551

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