Question

TAKULAH traders ltd purchased a machine for $650000 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 years and more than the residual value to be $50,000. on 1 July 2023 the asset's fair value is $460000 and the residual value and useful life are expected to be unchanged.

provide journal entries necessary to account for all the above transactions and event unto 1 July 2023, in accordance with AASB 116 if the revaluation is undertaken

Answer 1

ANSWER

Journal Entries ($)

30/06/2022	Loss on Revaluation (Or impairment loss) (Note 1) Dr	90,000
	To Machine		90,000
	(Loss on revaluation recognised)
01/07/2023	Asset Dr	90,000
	To Gain on revaluation (Note 2)		90,000
	(Gain to the extent of previous impairment now recognsied)

1.

The impairment loss as on 30/06/2022 is ($):

Fair value		450,000
Purchase cost	650,000
Less: Depreciation	(110,000)	540,000
So, impairment loss		90,000

2.

As on 01/07/2023:

Revaluation gain ($)

Fair value		460,000
Carrying value	450,000
Less: Depreciation (450,000-50,000)/5	(80,000)	370,000
Gain on revaluation		90,000

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