Reference no: EM132925646

Question - In the 31st December, 2019 annual report of Stela ltd, the equipment was reported as follows:

Equipment (at cost) $300 000

Accumulated Depreciation $ 37 500

$262 500

The equipment consists of two machines, Machine A and Machine B. Machine A had cost $200 000 and had a carrying amount of $175 000 at 31 December, 2019, and Machine B had cost $100 000 and was carried at $87 500. Both machines are measured using the cost model and depreciation on a straight line basis over 8 year period.

On April 30th 2020, the directors of ABC Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to $160 000 with an expected useful life of 5 years. And Machine B was revalued to $70,000 with an expected life of 5 years.

At 31st December 2020, Machine A was assessed to have a fair value of $140 000 with an estimated life of 4 years and Machine B's fair value was 60 000 with an expected useful life of 4 years.

The Tax rate is 30%.

Required - Prepare the journal entries during the period 1 January 2020 to 31st December, 2020 in relation to the equipment (show all workings) Assuming accounting period Jan-Dec.