Reference no: EM13858910

Shiver Ltd uses the cost model for machinery (Purchased on 1 July 2011). The useful life of machinery was 10 years, and Shiver depreciated the machinery on a straight line basis with no residual value. On 1 July 2014 Shiver had the following data:

Machinery                                 $200,000

Less accumulated depreciation    60,000

Carrying amount                       140,000

Prepare the general journal entries for the following:

• The useful life was revised from 10 years to 8 years on 30 June 2015 at the end of the current reporting period (this change is classed as material). No depreciation has been provided in the current period.

• 1 July 2015 recognition of impairment loss on machinery of $10,000.

• 1 July 2015 recognition of reversal of impairment loss on machinery of $15,000.

• Explain the difference in the accounting treatment for revaluation increments and revaluation decrements. Do you consider that this difference is ‘conceptually sound'?