Reference no: EM132579894

Spider Ltd acquired an item of plant on 1 July 2016 for $200 000, at which time the plant was expected to have a useful life of ten years, with no residual value. Spider Ltd has chosen to adopt the revaluation model for plant. Fair values have been estimated as follows: - 1 July 2017 = $162 000 - 1 July 2019 = $154 000

Question (a) Spider Ltd did not measure fair value at 1 July 2018 but did measure fair value at both 1 July 2017 and 1 July 2019. Given Spider Ltd has adopted the revaluation model is this appropriate?

Question (b) Ignoring tax, and rounding all values to the nearest dollar, prepare journals entries for the revaluation at 1 July 2019. (ensure journals are professionally presented and show all workings)

Question (c) The plant is sold on 31 December 2019 for $120 000 cash. Ignoring tax, and rounding all values to the nearest dollar, prepare journals entries to record depreciation expense for the year and recognise the gain or loss on the sale of the asset. (ensure journals are professionally presented and show all workings)

Question (d) Mr Parker, the general manager of Spider Ltd, mentions to you that he wishes the revaluation of the plant had not been undertaken on 1 July 2019 as Spider Ltd's profit for the year ending 30 June 2020 would have been higher had the revaluation of the asset not been undertaken.

Explain if this is a valid reason for not undertaking a revaluation

Is the general manager correct that profit would have been higher if there has been no revaluation on 1 July 2019? Ensure you justify your answer with an explanation