Question

Sandy Ltd owns a machinery, acquired in 2020. The machinery cost $250 000. Valuations of the machinery is undertaken by an independent valuer on 30 June 2021 and 30 June 2023. The machinery is revalued to $220 000 on 30 June 2021 and revalued to $280 000 on 30 June 2023.
Required
Assuming asset revaluations were undertaken for the machinery in both 2021 and 2023, provide the journal entries for both years. Show workings and calculations.

Answer 1

Answer is as follows:

1. Entry in 2021:

Impairment loss - machinery A/C Dr $30000

To Accumulated Impairment Loss - machinery A/C $30000 ($250000 - $220000)

2. Entry in 2023:

Machinery A/C Dr $30000   

Accumulated Impairment Loss - machinery A/C Dr $30000

To Gain on Revaluation A/C $30000

To Revaluation Reserve A/C $30000

1. In case of upward revaluation, by debiting the  accumaulated imparment loss earlier recognised  has to be reversed first and credit the gain on revaluation a/c with same amount.

2. And balance if any is to be credited to revaluation reserve a/c and debited to machinery a/c with same amount.