Prepare journal entries to record depreciation

Assignment Help Financial Accounting

Reference no: EM133855379

Workshop - Property Plant and Equipment

Activity 1
For financial reporting purposes, should property, plant and equipment be reported at cost or at fair value?

Activity 2

The following data from Lyre Ltd's accounts relates to two assets at 30 June 2022:

At 30 June 2022 Lyre Ltd decides to adopt the revaluation model for both these assets. On this date land has a fair value of $1 500 000 and plant and equipment has a fair value of $220 000.

Required
Prepare the journal entries required to revalue the assets for the year ended 30 June 2022

Activity 3

On 30 June 2022, the statement of financial position of Kookaburra Ltd showed the following non-current assets after charging depreciation.

The company has adopted fair value for the valuation of non-current assets. This has resulted in the recognition in previous periods of an asset revaluation surplus for the building of $14 000. On 30 June 2022, an independent valuer assessed the fair value of the building to be $160 000 and the vehicle to be $90 000. Get Professional Assignment Help Service Now!

Required
Prepare any necessary entries to revalue the building and the vehicle as at 30 June 2022.
Assume that the building and vehicle had remaining useful lives of 25 years and 4 years respectively, with zero residual value. Prepare entries to record depreciation expense for the year ended 30 June 2022 using the straight-line method.

Activity 4

Gunnamatta Ltd acquired a printing machine on 1 July 2021 for $100 000. It is expected to have a useful life of 10 years, with the benefits being derived on a straight- line basis. The residual is expected to be nil.

On 1 July 2023 the machine is deemed to have a fair value of $96 000 and a revaluation is undertaken in accordance with Gunnamatta Ltd's policy of measuring property, plant and equipment at fair value.

The asset is sold for $89 000 on 1 July 2025.

Required:

Provide the journal entries necessary to account for the above transactions and events.

After Workshop

Activity 1

What choices of measurement model exist subsequent to assets being initially recognised?

Activity 2

What factors should entities consider in choosing alternative measurement models?

Activity 3

Should accounting for revaluation increments and decrements be done on an asset- by-asset basis or on class-of-assets basis?

Activity 4

In the 30 June 2019 annual report of Emu Ltd, the equipment was reported as follows:

The equipment consisted of two machines, Machine A and Machine B. Machine A had cost $300 000 and had a carrying amount of $180 000 at 30 June 2019, and Machine B had cost $200 000 and had a carrying amount of $170 000. Both machines are measured using the cost model, and depreciated on a straight-line basis over a 10- year period.

On 31 December 2019, the directors of Emu Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to $180 000 with an expected useful life of 6 years, and Machine B was revalued to $155 000 with an expected useful life of 5 years.

At 1 July 2020, Machine A was assessed to have a fair value of $163 000 with an expected useful life of 5 years, and Machine B's fair value was $136 500 with an expected useful life of 4 years.

Required
Prepare journal entries to record depreciation during the year ended 30 June 2020, assuming there was no revaluation.

Prepare the journal entries for Machine A for the period 1 July 2019 to 30 June 2020 on the basis that it was revalued on 31 December 2019.

Prepare the journal entries for Machine B for the period 1 July 2019 to 30 June 2020 on the basis that it was revalued on 31 December 2019.

Prepare the revaluation journal entries required for 1 July 2020.

According to accounting standards, on what basis may management change the method of asset measurement, for example from cost to fair value?

Reference no: EM133855379

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