Reference no: EM132623595
Problem 1: When an asset is measured using the revaluation model, any impairment loss is treated as:
a) a revaluation increment.
b) an off-set against depreciation expense.
c) an addition to depreciation expense.
d) a revaluation decrement.
Problem 2: The draft statement of financial position for Banjo Ltd as at 30 June 2021 discloses the following:
Machinery (at cost) $750 000
Less Accumulated depreciation 400 000 $350 000
On the same date, Banjo Ltd assessed the fair value of the machinery to be $400 000.
The tax rate is 30%. Depreciation rates are 10% p.a. (accounting) and 12.5% p.a. (tax) using the straight-line method.
In accordance with IAS 16 Property, Plant and Equipment, the journal entries necessary to record the revaluation of machinery (ignoring any tax effect) at 30 June 2021 is:
a)
Machinery Dr 350 000
Gain on revaluation - OCI Dr 50 000
Accumulated depreciation - Machinery Cr 400 000
b)
Machinery Dr 50 000
Gain on revaluation - OCI Cr 50 000
c)
Gain on revaluation - OCI Dr 50 000
Asset revaluation surplus Cr 50 000
d)
Accumulated depreciation - Machinery Dr 400 000
Machinery Cr 400 000
Machinery Dr 50 000
Gain on revaluation - OCI Cr 50 000