Question

Part C Question 2 Accounting for Non-current Assets                                            

On 1 July 2018 Fraser Ltd acquired an item of equipment with an acquisition cost of $400,000. The equipment can be used for 8 years.

On 30 June 2019, the end of financial year, the fair value of the equipment was $357,000.

The equipment was sold for $330,000 on 1 January 2020.

Non-current asset is depreciated evenly over the useful life and has no residual value. The company uses the revaluation model to record non-current asset. The income tax rate is 30%. Ignore GST.

Required:

Prepare relevant journal entries to record non-current asset in 2018/2019 and 2019/2020 financial years in accordance with AASB 116 and AASB 136. (Narrations are required, tax effect entries are required.)    

   

Answer 1

Date Particular Dr. Cr.

1st July 2018 Equipment A/c Dr. $400,000  

To Bank A/c $400,000

((Being Equipment Purchased)   

30th June 2019 Depreciation A/c Dr. $50,000

To Equipment A/c $50,000

(Being Depriciation Charged on Equipment)

30th June 2019 Equipment A/c Dr. $7,000

To Revaluation A/c $7,000

(Being Asset Revalued at $357,000)

1st Jan 2020 Depreciation A/c Dr. $25,000

To Equipment A/c $25,000

(Being 6 Months Depriciation Charged)

1st Jan 2020 Bank A/c Dr.   $330,000

Profit and Loss A/c Dr. $2,000

To Equipment A/c $332,000

(Being Equipment sold at loss)

30th June 2020 Profit and Loss A/c Dr.   $600

To Income A/c (30%*$2,000) $600

(Being paying income tax on loss)