At 1 July 2017, Lobstar Ltd acquired the following non-current assets:
Equipment $100 000 Vehicles $80 000
They are in different classes of non-current assets and are to be measured at fair value. The expected useful lives of vehicles and equipment are 5 years and 10 years, respectively.
At 30 June 2015, the fair values of both assets were assessed. The equipment had a fair value of $82 000, and the vehicles, $70 000. The remaining useful lives were assessed to be 8 years for equipment and 7 years for vehicles.
Required
Prepare the journal entries for Lobstar Ltd for the years ending 30
June 2015 and 2016.
Lobstar Ltd. | ||||
Date | Particular | Ref. Post | Debit ($) | Credit ($) |
30-Jun-15 | Depreciation Expense a/c Dr. | W.N. 1 | 10,000 | |
To Accumulated Depriciation a/c | 10,000 | |||
(Depreciation charged on equipment) | ||||
Accumulated Depreciation a/c Dr. | 10,000 | |||
To Equipment a/c | 10,000 | |||
(Value of equipment written down to $90,000) | ||||
Loss on revaluation of equipment a/c Dr. | 8,000 | |||
To Equipment a/c | 8,000 | |||
(Value of equipment decreased from $90,000 to $82,000) | ||||
Depreciation expense a/c Dr. | W.N. 2 | 16,000 | ||
To Accumulated depriciation a/c | 16,000 | |||
(Depreciation charged on vehicle) | ||||
Accumulated Depreciation a/c Dr. | 16,000 | |||
To Vehicle a/c | 16,000 | |||
(Value of equipment written down to $90,000) | ||||
Vehicle a/c Dr. | 6,000 | |||
To gain on revaluation of Vehicle a/c | 6,000 | |||
(Value of equipment increased from $64,000 to $70,000) | ||||
Income tax expense | 1,800 | |||
Depreciation = Value of asset - Scrap Value / Useful life
W.N. 1: Depreciation on Equipment = 1,00,000 - 0 / 10 = $10,000
W.N. 2: Depreciation on Vehicle = 80,000 - 0 / 5 = $16,000
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