Question 4 [16 marks]Revaluation of property, plant andequipmentYou are the accountant for Superstar...Question 4...

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Question 4 [16 marks]
Revaluation of property, plant andequipment
You are the accountant for Superstar Ltd, and you are requiredto account for the company’s equipment for the years ended 30 June2017 and 30 June 2018, which are measured using the revaluationmodel. The directors elect to depreciate equipment on astraight-line basis.
Equipment 1:
The first equipment has a carrying amount as follows, prior toany depreciation or revaluation being recognised for the year ended30 June 2017:
Revalued amount (as at 30 June2016): $60,000
Less: accumulated depreciation    -
Carrying amount $60,000
$60,000
This equipment was revalued for the first time on 30 June 2016,from $70,000 to $60,000. The directors determined that as at 30June 2016, this equipment had an estimated remaining useful life of4 years, and an estimated residual value of $10,000.
The directors have determined that the fair value of thisequipment on 30 June 2017 is $55,000. At 30 June 2017, thisequipment had an estimated remaining useful life of 3 years, andthe residual value remains unchanged at $10,000.
The directors have determined that the fair value of thisequipment on 30 June 2018 is $44,000.
Equipment 2:
The second equipment at has a carrying amount as follows, priorto any depreciation or revaluation being recognised for the yearended 30 June 2017:
Revalued amount (as at 30 June2016): $20,000
Less: accumulated depreciation    -
Carrying amount $20,000
$20,000

This equipment has been revalued a number of times, withrevaluation decrements amounting to $1,000 being previouslyrecognised in profit or loss. The directors determined that as at30 June 2016, this equipment had an estimated remaining useful lifeof 4 years, and an estimated residual value of $4,000.
The directors have determined that the fair value of thisequipment on 30 June 2017 is $18,000. At 30 June 2017, thisequipment had an estimated remaining useful life of 3 years, andthe residual value has been revised to $6,000.
This equipment is sold on 31 December 2017 for $13,000.
Required:
Prepare the necessary journal entries to account for each of theabove equipment for the years ended 30 June 2017 and 30 June 2018(including entries for depreciation, revaluations, and anydisposals). Show all relevant workings. Note: you are not requiredto account for income tax associated with revaluations.

Answer & Explanation Solved by verified expert

4.0 Ratings (781 Votes)

Equipment 1 For 30 June 2017 Carrying Amount is 60000 Calculating Depreciation Straight Line Method 60000 10000 Residual Value 50000 The equipment can be used for 4 more years so 500004yrs 12500 per year Journal Entry First of all we will do the depreciation entry Depreciation Ac Dr 12500 To Equipment 1 Ac Cr 12500 So the Decpreciated Value as on 30 June 2017 is 60000 12500 47500 According to the Accounting Standard If the assets carrying amount is increased as a result of revaluation upword the increase shall be recognized in Other Comprehensive Income and accumulated in the equity under the heading of Revaluation SurplusHowever the increase shall be recognised in the Profit Loss to the extent that it reverses a revaluation decrease of the same asset previously recognized in See Answer

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In: AccountingQuestion 4 [16 marks]Revaluation of property, plant andequipmentYou are the accountant for Superstar...Question 4 [16 marks]Revaluation of property, plant andequipmentYou are the accountant for Superstar Ltd, and you are requiredto account for the company’s equipment for the years ended 30 June2017 and 30 June 2018, which are measured using the revaluationmodel. The directors elect to depreciate equipment on astraight-line basis.Equipment 1:The first equipment has a carrying amount as follows, prior toany depreciation or revaluation being recognised for the year ended30 June 2017:Revalued amount (as at 30 June2016):$60,000Less: accumulated depreciation -Carrying amount$60,000$60,000This equipment was revalued for the first time on 30 June 2016,from $70,000 to $60,000. The directors determined that as at 30June 2016, this equipment had an estimated remaining useful life of4 years, and an estimated residual value of $10,000.The directors have determined that the fair value of thisequipment on 30 June 2017 is $55,000. At 30 June 2017, thisequipment had an estimated remaining useful life of 3 years, andthe residual value remains unchanged at $10,000.The directors have determined that the fair value of thisequipment on 30 June 2018 is $44,000.Equipment 2:The second equipment at has a carrying amount as follows, priorto any depreciation or revaluation being recognised for the yearended 30 June 2017:Revalued amount (as at 30 June2016):$20,000Less: accumulated depreciation -Carrying amount$20,000$20,000 This equipment has been revalued a number of times, withrevaluation decrements amounting to $1,000 being previouslyrecognised in profit or loss. The directors determined that as at30 June 2016, this equipment had an estimated remaining useful lifeof 4 years, and an estimated residual value of $4,000.The directors have determined that the fair value of thisequipment on 30 June 2017 is $18,000. At 30 June 2017, thisequipment had an estimated remaining useful life of 3 years, andthe residual value has been revised to $6,000.This equipment is sold on 31 December 2017 for $13,000.Required:Prepare the necessary journal entries to account for each of theabove equipment for the years ended 30 June 2017 and 30 June 2018(including entries for depreciation, revaluations, and anydisposals). Show all relevant workings. Note: you are not requiredto account for income tax associated with revaluations.