Reference no: EM132563514

Roney Ltd, the retailer of Zara clothing, is preparing its end of year financial statements at 31 December 2020. The balance sheet shows only two non-current assets, buildings and equipment.

After depreciation entries were completed for the year ending 31 December 2020, the accumulated depreciation of its non-current assets were as follows:

Buildings 24,200,000

Accumulated Depreciation (5,000,000)

Equipment 7,000,000

Accumulated Depreciation (3,800,000)

The company applies the revaluation model to buildings and the cost model to equipment. At 31 December 2020, the following values relating to the assets have been determined:

Fair value of Buildings $15,500,000

Value in use $15,600,000

Costs to sell $600,000

Fair value of Equipment $1,700,000

Value in use of Equipment $1,300,000

Costs to sell of equipment $300,000

Question I. Prepare the necessary general journal entries in relation to the equipment for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required).

Question II. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards.

Question III. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2021 and justify in accordance with appropriate accounting standards. Assume the depreciation for the year is $1,000,000 and the fair value of the buildings at 31 December 2021 was $25,000,000.