Question

On 1 July 2017, Norwich Ltd paid $80,000 cash to acquire a machine. On this date it was estimated that the machine had a useful life of ten years and a residual value of $10,000. In accordance with AASB 116 Property, Plant and Equipment, Norwich Ltd uses the revaluation model as its accounting policy to measure items of property, plant and equipment and the straight-line method of depreciation. Norwich Ltd has a 30 June reporting date.

An independent valuer provided the following fair values for the machine:

Reporting date Fair value

30 June 2018 $91,000

30 June 2019 66,000

30 June 2020 52,000

On 31 December 2020, the machine was sold for $50,000 cash.

Required

Prepare the journal entries to account for the events and transactions in relation to the machine between 1 July 2017 and 31 December 2020.

Answer 1

^) Cost % 80,000 of machinery Residual value 10,000 10 year usful life Depreciation 60 000 - 10000 10 - & 7000 per year at the end of year 2016 (18. Carrying value g -87000 Machine ut 8000 $73000 FV – 891000 to Revaluation surplus & 91000 – $73000 Amount credited 8 (8000 At the end of 30/6/19 Revised carrying value=491000 Remaining useful life: a years Residual value. 19000 Depreciation & 91000 - 10,000 = '$ 9000 $ 9000 - Carrying value of 91000- $82007 FV = $66000 debited to Revaluahon surplus.- 82000 - 66000 Amount $ 16000

$16000 to be debited to Revaluation surplus became there is credit balance in Rovaluation suples of $180oo At the end of 30/6/2020 ferised carrying value 666000 Residual value: $19000 ushed life years Deprecration: 66001 - 10000 $ 7000 Camping value $66000-$1000 $ 59000 FV 52000 difference between fr and carrying value 52000 - 59000 $ 7000 2000 out of $7000 $ 2000 to be debited to Revaluahon surplu sme this is left in the Revaluation the amount Balong 85000 to be defited to proft Surplus slos alc 31/12/20 carrying value $52000 Depreciation: 52000 - 10,000 Cooo User ) Depreciation for 30/2/20 = 6000 & 3000 (since 6 months 2 carrying value on 30/12/20 6 5200 300 $4900

Debit(& credit (15) 1/1/11 80,000 Particulars Machine Ale cash (Being Machinery purchased cash) fu 11000 80/che Depreciation Ale 7000 Machine de (Being depreciation charged Machine) on 30/6118 Machine Alc 18000 Revaluation surplus 18000 (Being Machine measured FY and evaluation surplus credited) at 30/6/19 Depreciation ne 9000 Machine Alc 9000 30/2/19 Revaluation surples as 16000 Machine 16осло (Being Machine measured at Fv and revaluation Surplus debited! 30/6/20 7000 Depreciation Ale Machine 7000 30/6/20 2000 5000 7000 Revaluation surplus profit a loss Mochine MC (Bring machine measured at Fu and revaluation sulplus debited to the extent avoilable and balana to profit & los ale

3000 31/12/20 Depreciation Alc 3000 Machine (Bring Depreciahon charged for 6 months 31/12/20 Can Ale 50,000 Machine Alc 49000 profit & Loss 1000 (Being machine sad for Cash and prokt is transferred to pront & los de