Question

On 1 July 2017, Guinness Ltd acquired two assets within the same class of plant and equipment for cash. Information on these assets is as follows.

Cost ($) Expected Useful Life

Machine A 100,000 5 years

Machine B 60,000 3 years

The machines are expected to generate benefits evenly over their useful lives. The class of plant and equipment is accounted for subsequent to acquisition using the revaluation model. At 30 June 2018, information about the assets is as follows.

Fair Value ($)

Machine A 84,000

Machine B 38,000

On 1 January 2019, Machine B was sold for $29 000 cash. At 30 June 2019, information on the machines is as follows.

Fair Value ($) Expected Useful Life

Machine A 58,000 3 years

Required:

a) Prepare the journal entries in the records of Guinness Ltd to record the events for the year ended 30 June 2018. [15 marks]

b) Prepare journal entries to record the events for the year ended 30 June 2019. [13 marks]

Answer 1

- hedit . The Asset is initially recorded in cash at cost when purchased Journal Entry Debit Date 1-July 2017 Machine A Ale or 1,00,000 machine B Ale or 60,000 1,60,000 To lash 30 June 2018 40,000 (100,000 ) syears Depreciation ofc as To machine A To machine B 20,000 20,000 ( 60,000 3 years Ginen were [Being depreciation for the year 2018 recorded) that subsequent to acquisition, the equipment accounted using nevahration model. machine 4000 A ale or To Revaluation suplus - 4000 - Revaluation smphis holds upward nevaluations upto the date of disposal. (84,000 - 80,000 =4000) carrying value of the asset Impairment loss ale os 2000 To machine i ale 2000 (Being impairment on the asset recorded) P&L ale or 2000 To impairment lors - 2000 (impairment loss charged to P&L ale )

Note :- Renaluation suphs is recognised under other comprehensine Income and accumalated under the theading "Revaluation sphers" 01-Jan - 2019 Depreciation olc as (84,000, (28000/2) 214,000 3 To machine a ale 14,000 9500 Depreciation are ar 9500 To machine B Ale ( 38,000 for year = 19,000 for 6 months = 19,000 6 176 Cash ale Di P&L ale Dr To machine B 29.000 500 28,500 Impairment less alcoor To machine A 12,000 - 12,000 (70,000 - 58,000) However in place of Impairment loss, it shall be changed to Revalued supers Cupward nevaluation earlier) and not Profit I loss Hence the entry shall be Revaluation Impers alcoor 12,000 To impairment lors - 12,000.

please provide feedback