Question

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. (11 marks

Answer 1

Journal Entries

Date	Particulars	Debit	Credit
30-6-2022	Profit and Loss Account	90000
	Accumulated Depreciation	110000
	To Machinery Account		200000
	(loss on revaluation)
30-6-2023	Depreciation	80000
	To Accumulated Depreciation		80000
	(Revised depreciation)
1-7-2023	Machinery Account	90000
	To Profit and Loss Account		90000
	(revaluation gain recognised in profit or loss)

Workings :

30-6-2022

Purchase Value of machine = 650000

Less: Accumulated depreciation = (110000)

Carrying Value as on 30-6-22 = 540000

Revaluation = 450000

Loss on revaluation = 540000-450000 = 90000

30-6-2023

Revised Depreciation = 450000-50000(residual value)/5 years

= 80000

1-7-2023

Carrying value as on 1-7-2023 = 450000-80000 = 370000

Revised revaluation amount = 460000

Revaluation gain = 460000-370000 = 90000