Reference no: EM132984998
In the 30 June 2022 annual report of Wombat Ltd, the equipment was reported as follows:
Equipment (at cost) $250 000
Accumulated depreciation $75 000
$175 000
Depreciation and revaluation of assets
In the 30 June 2022 annual report of Wombat 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 2022. 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 2022, the directors of Wombat 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 2023, 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
Problem 1. Prepare journal entries to record depreciation during the year ended 30 June 2023, assuming there was no revaluation.
Problem 2. Prepare the journal entries for Machine A for the period 1 July 2022 to 30 June 2023 on the basis that it was revalued on 31 December 2022.
Problem 3. Prepare the journal entries for Machine B for the period 1 July 2022 to 30 June 2023 on the basis that it was revalued on 31 December 2022.
Problem 4. Prepare the revaluation journal entries required for 1 July 2023.
Problem 5. According to accounting standards, on what basis may management change the method of asset measurement, for example from cost to fair value?
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