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P10-11

Camco Manufacturers Inc., a publicly listed company, has two machines that are accounted for under the revaluation model. Technology in Camco's industry is fast-changing, causing the fair value of each machine to change significantly approximately every two years. The following information is available:

	Machine #1	Machine #2
Acquisition date	Jan. 2, 2014	June 30, 2013
Original cost	$440,000	$540,000
Original estimate of useful life	8 years	12 years
Original estimate of residual value	-0-	-0-
Pattern of depreciation	Straight-line	Straight-line
Fair value at Dec. 31, 2015	310,000	440,000
Balance in Machinery account after proportionate method revaluation on Dec. 31, 2015	413,333	555,789
Balance in Accumulated Depreciation account after proportionate method revaluation on Dec. 31, 2015	103,333	115,789
Cumulative balance in (Revaluation Gain or Loss)/Revaluation Surplus (OCI) at Jan. 1, 2017	(20,000)	12,500
Fair value at Dec. 31, 2017	230,000	328,000

Both machines were last revalued on December 31, 2015. Camco has a December 31 year end.

Instructions (a) Prepare the journal entries required for 2017, using the asset adjustment method. (b) Prepare the journal entries required for 2017, using the proportionate method. (c) Prepare a continuity schedule showing for each machine the amounts recorded to the Machine account and to the Accumulated Depreciation account, as well as indicating the carrying amount for each fiscal year from date of purchase to December 31, 2017, using (1) the asset adjustment method and (2) the proportionate method. Show the carrying amount under each method at the end of each fiscal year. (d) Comment on the effects on the 2017 statement of comprehensive income with respect to parts (a) and (b). (e) Comment on the effects on the December 31, 2017 statement of financial position with respect to parts (a) and (b). (f) Would a potential investor prefer Camco to use the asset adjustment method or the proportionate method to apply the revaluation model?

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