Question

On 1 July 2019, CRX Construction Ltd paid $150,000 cash to acquire an item of plant equipment. On this date it was estimated that the item of plant equipment had a useful life of ten years and a residual value of $20,000. CRX Construction Ltd uses the revaluation model to measure items of property, plant and equipment and the straight-line method of depreciation. CRX Construction Ltd has a 30 June reporting date.

An independent valuer provided the following fair values for the item of plant equipment:

Reporting date                                                    Fair value

30 June 2020                                                          $110,000

30 June 2021                                                            116,000

30 June 2022                                                            118,000

On 30 September 2022, the item of plant equipment was sold for $120,500 cash.

Required

Prepare the journal entries to account for the events and transactions in relation to the item of plant equipment between 1 July 2019 and 30 September 2022.

Answer 1

		CRX Construction Ltd.
		Journal
S.No	Date	Journal	Debit ($)	Credit ($)
1	01-07-19	Plant Equipment	150,000
		Cash		150,000
		( Being Plant Equipment acquired )
2	30-06-20	Depriciation Expense	13,000
		Accumulated Depreciation - Plant Equipment		13,000
		( Being depreciation recorded, (150,000-20,000) /10 )
3	30-06-20	Revaluation Surplus	27,000
		Plant Equipment		27,000
		( Being Assets revalued at fair value )
4	30-06-21	Depreciation Expense	13,000
		Accumulated Depreciation - Plant Equipment		13,000
		( Being depreciation recorded, (150,000-20,000) /10 )
5	30-06-21	Plant Equipment	19,000
		Revaluation Surpulus		19,000
		( Being Assets revalued at fair value )
6	30-06-22	Depriciation Expense	13,000
		Accumulated Depreciation - Plant Equipment		13,000
		( Being depreciation recorded, (150,000-20,000) /10 )
7	30-06-22	Plant Equipment	15,000
		Revaluation Surpulus		15,000
		( Being Assets revalued at fair value )
8	30-06-22	Depreciation Expense	3,250
		Accumulated Depreciation - Plant Equipment		3,250
		( Being depreciation recorded, (13,000 x 3/12 )
9	30-09-22	Cash	120,500
		Plant Equipment		120,500
		( Being equipment sold )
10	30-09-22	Plant Equipment	5,750
		Gain on Sale of Equipment ( P&L )		5,750
		( Being proft on sale of equipment recorded )
11	30-09-22	Revaluation Surpulus	7,000
		Retained Earnings		7,000
		( Being revaluation reserve tranferred on sale of asset )