Reference no: EM133012552
Question -
(a) You are working as an accountant for Kanga Ltd. In the 30 June 2020 annual report of Kanga Ltd, the equipment was reported as follows:
Equipment (at cost) $250,000
Accumulated depreciation (75,000)
175,000
The equipment consisted of two machines, Machine A and Machine B. Machine A had cost $150 000 and had a carrying amount of $90 000 at 30 June 2020. Machine B had cost $100 000 and had a carrying amount of $85 000. Both machines are measured using the cost model and depreciated on a straight-line basis over a 10-year period.
On 31 December 2020, the directors of Kanga Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to $90 000 with an expected useful life of 6 years, and Machine B was revalued to $77 500 with an expected useful life of 5 years.
At 1 July 2021, Machine A was assessed to have a fair value of $81 500 with an expected useful life of 5 years, and Machine B's fair value was $68 250 with an expected useful life of 4 years.
Required -
(i) Prepare the journal entries for Machine A for the period 1 July 2020 to 30 June 2021 on the basis that it was revalued on 31 December 2020.
(ii) Prepare the journal entries for Machine B for the period 1 July 2020 to 30 June 2021 on the basis that it was revalued on 31 December 2020.
(iii) Prepare the revaluation journal entries required for Machine A on 1 July 2021.