Reference no: EM132841760
Question - Part (a) - Webby Ltd has various non-current assets, including Buildings and Machinery. The buildings were purchased six years ago, have an anticipated residual value of $400,000 and an expected useful life of 20 years. The buildings are being recorded under the revaluation model (AASB 116). The machinery was purchased on 1 July 2013 for $230,000, has an anticipated residual value of $80,000 and an expected useful life of 15 years. It is being recorded under the cost model (AASB 136). Both assets are being depreciated using the straight-line method.
Further information on the assets for 30 June 2015 is provided below:
Non-current Assets - Carrying Amounts
Buildings 635,000 (after revaluation)
Machinery 210,000
Information relevant to the assets at 30 June 2016 is:
Buildings fair value $712,000
Machinery recoverable amount $197,000
There was a downward revaluation of the buildings by $10,000 last year and the remaining useful life of the Buildings at the 30 June 2015 was 14 years.
Required - Prepare the general journal entries for the year ended 30 June 2016 for both assets, taking into account the information provided above. Narrations are not required. Justify your entries.
Part (b) - Slowpoke Ltd has purchased a truck on 1 July 2016. The list price of the truck was $200,000 but Slowpoke was invoiced and paid only $180,000. Slowpoke did have to pay for an inspection costing $30,000 on 1 July 2016 before the truck could be used for the first time. In addition, they purchased an annual insurance policy for the truck costing $24,000 (recorded using the Expense approach). The truck will be depreciated using the reducing balance method at a rate of 10% per annum.
On 1 September 2016, the truck broke down and Slowpoke spent $40,000 to get it back to working condition.
On 1 July 2017, Slowpoke decided to replace the engine in the truck with a newer model costing $61,000 that uses considerably less petrol and makes the truck more powerful so that it could also haul a trailer. The 10% reducing balance rate of depreciation is still applied.
Required - Prepare the general journal entries for the years ended 30 June 2017 and 30 June 2018 related to the truck, taking into account the information provided above. Narrations are not required. Justify your entries.