Exercise 3.

1
On 1 January Year 1 Entity A purchased for $ 240,000 a machine with an estimated useful life of 20 years and an estimated
impairment review showed the machine’s recoverable amount to be $ 100,000 and its remaining useful life to be 10 years
Required: Calculate the amounts to be included in the statement of comprehensive income for Year 4 if the asset had b
date.
Respond:
Jan 1/Year 1: puchase machine
Dr Asset 240,000
Cr Cash 240,000
Dec 31/Year 1: Depreciation
Dr Depreciation expense 11,998
Cr Accumulated depreciation 11,998
Dec 31/Year 2:Depreciation
Dr Depreciation expense 11,998
Cr Accumulated depreciation 11,998
Jan 1/ Year 3:
Carrying ammount 216,005
Fair value 250,000
Write-off accumulated depreciation, decrease asset
Dr Accumulated depreciation 23,995
Cr Asset 23,995
Revaluation Dr Asset 33,995
Cr Revaluation surplus (OCI) 33,995
Dec 31/ Year 3: Depreciation
Dr Depreciation expense 13,886
Cr Accumulated depreciation 13,886
Jan 1/ Year4:
Carrying ammount: 236,114
Recoverable ammount 100,000
Dr Impairment loss 102,119
Dr Revaluation Surplus (OCI) 33,995
Cr Asset 136,114
Dec 31/Year 4: Depreciation
Dr Depreciation Expense 9,995
Cr Accumulated depreciation 9,995
 years and an estimated residual value of $ 50, straight – line depreciation applied. On 1 January Year 4 an
useful life to be 10 years.
Year 4 if the asset had been revalued on 1 January Year 3 to $ 250,000, with non-change in useful life at that
date.