Tutorial Week 4 Homework
Chapter 7: Property, plant and equipment
PRACTICE QUESTIONS
QUESTION 7.9
TOOWOOMBA LTD
1 July 2012
Machine A
Machine B
Cash
Dr
Dr
Cr
100 000
60 000
Depreciation expense Machine A
Accumulated depreciation
(1/5 x $100 000)
Dr
Cr
20 000
Depreciation expense Machine B
Accumulated depreciation
(1/3 x $60 000)
Dr
Cr
20 000
Accumulated depreciation- Machine A
Machine A
(Writing down to carrying amount)
Dr
Cr
20 000
Machine A
Dr
Gain on revaluation of Machine A (OCI) Cr
(Revaluation increment: $80 000 to $84 000)
4 000
Income tax expense (OCI)
Deferred tax liability
(Tax effect of revaluation increment)
Dr
Cr
1 200
Gain on revaluation of Machine A (OCI)
Dr
Income tax expense (OCI)
Cr
Asset revaluation surplus Machine A
Cr
(Accumulation of net revaluation gain in equity))
4 000
160 000
30 June 2013
Accumulated depreciation Machine B
Machine B
(Writing down to carrying amount)
Dr
Cr
20 000
20 000
20 000
4 000
1 200
1 200
2 800
20 000
20 000
Tutorial Week 4 Homework
Expense revaluation decrement (P&L)
Machine B
(Revaluation to fair value at 30/6/13)
Dr
Cr
2 000
Machine C
Cash
(Acquisition of machine C)
Dr
Cr
80 000
Depreciation expense Machine B
Accumulated depreciation
(1/2 x /1/2 x $38 000)
Dr
Cr
9 500
Cash
Dr
Cr
29 000
Carrying amount of Machine B Sold
Accumulated depreciation
Machine B
(Carrying amount of machine sold)
Dr
Dr
Cr
28 500
9 500
General reserve
Asset revaluation surplus Machine A
Share Capital
Dr
Dr
Cr
8 000
2 000
Depreciation expense Machine A
Accumulated depreciation
(1/4 x $84 000)
Dr
Cr
21 000
Depreciation expense Machine C
Accumulated depreciation
(1/4 x x $80 000)
Dr
Cr
10 000
Accumulated depreciation Machine A
Machine A
(Writing down to carrying amount)
Dr
Cr
21 000
Loss on revaluation of Machine A (OCI)
Machine A
(Write down of plant from $63000 to $61000)
Dr
Cr
2 000
2 000
1 January 2014
Proceeds on sale of Machine B
(Sale of Machine B)
80 000
9 500
29 000
38 000
10 000
30 June 2014
21 000
10 000
21 000
2 000
Tutorial Week 4 Homework
Deferred tax liability
Income tax expense (OCI)
(Tax-effect on downward revaluation
subsequent to upward revaluation)
Dr
Cr
600
Asset revaluation surplus Machine A
Income tax expense (OCI)
Loss on revaluation of plant (P&L)
Loss on revaluation of plant (OCI)
(Accumulation of revaluation loss to equity)
Dr
Dr
Dr
Cr
800
600
600
Accumulated depreciation Machine C
Machine C
(Writing down to carrying amount)
Dr
Cr
10 000
Loss on revaluation (P&L)
Machine C
(Revaluation to fair value at 30/6/14)
Dr
Cr
1 500
600
2 000
10 000
1 500
Tutorial Week 4 Homework
Chapter 9: Intangible assets
REVIEW QUESTIONS
14. Explain the application of the revaluation model for intangible assets.
Relevant paras are:
75.
After initial recognition, an intangible asset shall be carried at a revalued amount,
being its fair value at the date of the revaluation less any subsequent accumulated
amortisation and any subsequent accumulated impairment losses. For the purpose
of revaluations under this Standard, fair value shall be determined by reference to
an active market. Revaluations shall be made with such regularity that at the
balance sheet date the carrying amount of the asset does not differ materially from
its fair value.
81.
If an intangible asset in a class of revalued intangible assets cannot be revalued
because there is no active market for this asset, the asset shall be carried at its cost
less any accumulated amortisation and impairment losses.
82.
If the fair value of a revalued intangible asset can no longer be determined by
reference to an active market, the carrying amount of the asset shall be its revalued
amount at the date of the last revaluation by reference to the active market less any
subsequent accumulated amortisation and any subsequent accumulated impairment
losses.
85.
If an intangible asset's carrying amount is increased as a result of a revaluation, the
increase shall be credited directly to equity under the heading of revaluation
surplus. However, the increase shall be recognised in profit or loss to the extent
that it reverses a revaluation decrease of the same asset previously recognised in
profit or loss.
86.
If an intangible asset's carrying amount is decreased as a result of a revaluation, the
decrease shall be recognised in profit or loss. However, the decrease shall be
debited directly to equity under the heading of revaluation surplus to the extent of
any credit balance in the revaluation surplus in respect of that asset.
Method is basically the same as that under AASB 116 for PP&E. AASB 138 has a restriction
on use of fair value in that it must be measured by reference to an active market.
