Question

Question 3 - Week 3 TAKULAH Traders Ltd purchased a machine for $650 000 and there was an accumulated depreciation balance of $110 000 at 30 June 2022. Its fair value is assessed at this time, with its first revaluation as $450 000. The machine’s useful life is expected to be 5 more years and the residual value to be $50 000. On 1 July 2023 the asset’s fair value is $460 000 and the residual value and useful life are expected to be unchanged (that is, there is 4 years of remaining life). Required: Provide the journal entries necessary to account for all the above transactions and events up to 1 July 2023, in accordance with AASB 116 if the revaluation is undertaken.

Answer 1

Asset is booked on revalued fair value price as per AASB 116 (Cost of machine)

Journal Entries -

30-June 2022 Dr Asset (Machine ) $ 450,000

Cr Cash $450,000

(Being Asset is booked at fair value)

30-June 2023 Dr Depreciation $80,000

Cr Accumulated Depreciation -Machine $80,000

(Being depreciation charged for 1 year - (450000-50000)/5 )

01- July 2023 Dr Asset (Machine) -Revaluation $90,000

Cr profit & Loss A/c $90,000

( Being revaluation of Asset is made and difference is taken to P&L)

Note :

01 July 2023 asset is revalued at $460,000 and depreciation to be calculated based on revalued amount for remaining 4 years.