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

Date July 01 2017 Debit 100,000 Credit 100,000 Particulars Machinery A Cash (Machinery Purchased) Machiney B Cash (Machinery Purchased) July 01 2017 60,000 60,000 June 30 2018 40,000 Depreciation Machinery A Machinery B (To record depreciation) 20,000 20,000 June 30 2018 4,000 4,000 Machinery A Revaluation Reserve (To record revaluation of machinery) Revaluation reserve Machine B (To record revaluation of machinery) June 30 2018 2,000 2,000 Dec 31 2018 9,500 9,500 Dec 31 2018 Depreciation Machinery B Cash Loss on sale Machinery B 29,000 500 29,500 June 30 2019 21,000 Depreciation 21,000 Machinery A (To record depreciation on machinery) Revaluation Reserve 5,000 Machinery B (To record revaluation on machinery) June 30 2019 5,000

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