AF210 S2 2020

Unit 4 Tutorial Suggested Solutions

Deegan Text Book Chapter 5

5.28 (b)
Decl-balance Open CA Dep’n rate Dep’n Carrying amt
Year 1 120 000 40% 48 000 72 000
Year 2 72 000 40% 28 800 43 200
Year 3 if kept 43 200 40% 17 280 25 920
Year 4 if kept 25 920 remainder 25 920 0

30.6.17 Dr Depreciation expense $48 000

Cr Accumulated depreciation $48 000
Being depreciation charge for year

30.6.18 Dr Depreciation expense $28 800

Cr Accumulated depreciation $28 800
Being depreciation charge for year

01.07.18 Dr Accumulated depreciation $76 800

Cr Printing machine $120 000
Dr Gain on disposal $6 800
Dr Bank $50 000
Being sale of asset for $50 000

(d)
Production Cost Hours Dep’n Carrying amt
Year 1 120 000 3000 30 000 90 000
Year 2 120 000 3400 34 000 56 000
 30.6.17 Dr Depreciation expense $30 000
Cr Accumulated depreciation $30 000
Being depreciation charge for year

30.6.18 Dr Depreciation expense $34 000

Cr Accumulated depreciation $34 000
Being depreciation charge for year

01.07.18 Dr Accumulated depreciation $64 000

Cr Printing machine $120 000
Dr Loss on disposal $6 000
Dr Bank $50 000
Being sale of asset for $50 000

Leo Text Book Chapter 9

Case study 7 Building costs

See paragraph 16 of AASB 116
Include:
(a) stamp duty
(b) real estate agent’s fees
(c) architect’s fees
(d) interest [ may be expensed or capitalised – see AASB Borrowing Costs]
(e) costs of changing name on building
(g) costs of refurbishing lobby
Exclude:
(f) these may be considered as a separate asset, depends for example whether the parking bays
are an integral part of the building or external to the building
Question 9.2 Application of revaluation model
Twister Ltd
General Journal
30 June 2015

Depreciation expense – equipment Dr 10 000

Accumulated depreciation – equipment Cr 10 000
(Depreciation – $100 000 / 10 years)

Accumulated depreciation - equipment Dr 10 000

Equipment Cr 10 000
(Write down of equipment to carrying amount: $90 000)

Loss on revaluation (P/L) Dr 8 000

Equipment Cr 8 000
(Revaluation from carrying amount to fair value:
$90 000 to $82 000)

Depreciation expense – vehicles Dr 16 000

Accumulated depreciation – vehicles Cr 16 000
(Depreciation – 20% x $80 000)

Accumulated depreciation – vehicles Dr 16 000

Vehicles Cr 16 000
(Write-down to carrying amount: $64 000)

Vehicles Dr 6 000
Gain on revaluation of vehicles (OCI) Cr 6 000
(Revaluation increment: $64 000 to $70 000)

Gain on revaluation of vehicles (OCI) Dr 6 000

Asset revaluation surplus - vehicles Cr 6 000
(Accumulation of net revaluation gain in equity)
Note: Gain on revaluation of vehicles (OCI) can be directly replaced by Asset revaluation surplus.
So the above two journal entries can be combined as:
Vehicles Dr 6 000
Asset revaluation surplus - vehicles Cr 6 000

30 June 2016

Depreciation Expense – Equipment Dr 10 250

Accumulated depreciation – Equipment Cr 10 250
(Depreciation – $82 000 / 8years)

Accumulated depreciation - Equipment Dr 10 250

Equipment Cr 10 250
(Write down from previous FV $82 000 to
carrying amount $71 750)

Equipment Dr 10 000
Gain on revaluation of equipment (P/L) Cr 8 000
Gain on revaluation of equipment (OCI) Cr 2 000
(Revaluation of equipment from $71 750 to $81 750,
with prior revaluation write-down of $8 000)

Gain on revaluation of equipment (OCI) Dr 2 000

Asset revaluation surplus - equipment Cr 2 000
(Accumulation of revaluation gain in equity)

Note: Gain on revaluation of equipment (OCI) can be directly replaced by Asset revaluation
surplus. So the above two journal entries can be combined as:
Equipment Dr 10 000
Gain on revaluation of equipment (P/L) Cr 8 000
Asset revaluation surplus - equipment Cr 2 000
 Depreciation expense – vehicles Dr 10 000
Accumulated Depreciation – vehicles Cr 10 000
(Being depreciation – $70 000 / 7 years)

Accumulated depreciation – vehicles Dr 10 000

Vehicles Cr 10 000
(Write down of vehicles to carrying amount
of $60 000)
Loss on revaluation of vehicles (OCI) Dr 5 000
Vehicles Cr 5 000
(Write down to fair value: $60 000 to $55 000)

Asset revaluation surplus - vehicles Dr 5 000

Loss on revaluation of vehicles (OCI) Cr 5 000
(Reduction in accumulated equity due to
revaluation decrement on vehicles)

Note: Loss on revaluation of vehicles (OCI) can be directly replaced by Asset revaluation surplus.
So the above two journal entries can be combined as:
Asset revaluation surplus - vehicles Dr 5 000
Vehicles Cr 5 000