Reference no: EM132660572

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 $30 000. 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 for $35 000 plus $5 000 freight for cash.
• 2 July Paid $5 000 to upgrade the new vehicles so that they were suitable for use by Deg Ltd. A reducing balance depreciation rate of 30% will be used for calculating depreciation for the new vehicles.
• 18 Sept Spent $300 to have the new vehicles serviced.

2009

• 2 Jan Traded-in the existing equipment for new equipment costing $650 000. Deg Ltd received a trade-in of $250 000 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 $50 000.
• 30 June After assessing the fair values of the non-current assets of the business, vehicles needs to be re-valued to a fair value of $40 000 and land needs to be re-valued to a fair value of $400 000. Provide a brief narrative (description) for the land revaluation general journal entry only.

Required

Problem 1: Prepare entries in general journal form to record the events described above. Depreciation entries have not been recorded for any of the company's assets in this financial year. You will need to record any depreciation entries required during or at the end of the year.