Prepare journal entries to record the revaluation

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Reference no: EM132640735

Question - On January 1, 2017, Wine Company has a machinery with the following cost and accumulated depreciation.

Machinery 50,000,000

Accumulated Depreciation 15,000,000

The machinery was acquired on January 14, 2014 and has been depreciated using the straight-line method with useful life of 10 years and no residual value. On January 1, 2017, the entity has properly tested the machinery to be impaired. The machinery has a remaining life of 5 years and is expected to generate undiscounted net cash flows of P8million per year. The appropriate discount rate of 8% for 5 periods is 3.99. The fair value less cost of disposal of the machinery on January 1, 2017 is P30million.

Required -

a. Prepare journal entries to record the revaluation, annual depreciation and realization of the revaluation surplus.

b. Prepare the journal entry to record the impairment loss, if any.

c. Compute the impairment loss to be recognized in the 2017 profit or loss.

Reference no: EM132640735

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