Reference no: EM132564359
On 30 June 2019, Harry Ltd acquired two assets within the same class of plant and equipment. The equipment consisted of two machines, Machine A and Machine B. Machine A had cost $400,000 and had a carrying amount of $150,000 at 30 June 2019, and Machine B had cost $200,000 and was carried at $170,000. Both machines are measured using the cost model, and depreciated on a straight-line basis over a 10-year period.
On 31 December 2019, the directors of Harry Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. The information about the revaluation of assets is as follows:
31 December 2019
Machine Fair value Expected useful life
A $160000 4years
B $145000 5years
At 1 July 2020, Machine A was assessed to have a fair value of $135,000 with an expected useful life of 5 years. There was no change in valuation for Machine B.
Required:
Question (a) Prepare the journal entries for Machine A for the period 1 July 2019 to 30 June 2020 on the basis that it was revalued on 31 December 2019. Show all working out.
Question (b) Prepare the journal entries for Machine B for the period 1 July 2019 to 30 June 2020 on the basis that it was revalued on 31 December 2019. Show all working out.
Question (c) Prepare the revaluation journal entries for Machine A required for 1 July 2020.
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