Tutorial 10 Solution.docx - Tutorial 10 Non Current Assets Questions 8.10 Explain the accounting treatment for revaluation of assets The revaluation

Tutorial 10 Solution.docx - Tutorial 10 Non Current Assets...

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Tutorial 10: Non Current Assets Questions 8.10 ) Explain the accounting treatment for revaluation of assets. The revaluation model gives a business the option of carrying a fixed asset at its revalued amount. Subsequent to the revaluation , the amount carried on the books is the asset's fair value, less subsequent accumulated depreciation and accumulated impairment losses QUESTION 5 Part A On 1 July 2016, Dunlop Ltd purchased new equipment on credit from Serry Ltd (terms 2,30/n,60). The equipment was advertised for sale at $40 000 but after careful negotiation was invoiced at a reduced price of $36 000. The cost of installation of the equipment, paid in cash on 1 July 2016, was $4 000 and the equipment was expected to be sold for $10 000 at the end of its 4 years life in the business. Serry Ltd was paid in full settlement on 25 July 2016. It was decided to adopt the cost model of asset valuation and to use the straight-line method of depreciation. On 30 June 2017 the value in use of the asset was estimated to be $20 000, the assets fair value $15 000 and its replacement cost $40 000. On 31 December 2017 the equipment was sold for $18 000 cash. Required: (a) Show the general journal entries for the 1 July 2016 transactions. (b) Show the general journal entry for the 25 July 2016 transaction. (c) Show the general journal entry for depreciation on 30 June 2017. (d) Show the general journal entry (if applicable) for the impairment of the equipment on 30 June 2017. (e) Show the general journal entry for the depreciation of the equipment for the 6 months ending 31 December 2017. (f) Show the general journal entry to record the disposal (and gain or loss on sale) of the equipment on 31 December 2017. Copyright © Monash University 2018
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Invoice price: $36 000 Invoice date: 1/7/2002 Invoice terms 2/30/net 60 days July 30 payment Within 30 days 2% allowance, therefore $720 prompt payment discount (this does not affect the amount at which the asset is recognised); cash paid is $35 280.
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