Question

Gunna Ltd acquired a printing machine on 1 July 2018 for $100,000. It is expected to have a useful life of 5 years, with the benefits being derived on a straight- line basis. The residual is expected to be $nil. On 1 July 2019 the machine is deemed to have a fair value of $75,000 and a revaluation is undertaken in accordance with Gunnamatta Ltd’s policy of measuring property, plant and equipment at fair value. The asset is sold for $89 000 on 1 July 2020. Required: Provide the journal entries necessary to account for transactions and events at the following date. Narrations are required. (7 marks. Word limit: n/a) a) 30 June 2019 b) 1 July 2019 c) 30 June 2020 d) 1 July 2020

Answer 1

Journal Entries
Date	Account Titles and Explanation	Debit	Credit
a) 30th Jun. 2019	Depreciation Expense ($100,000-$0/5 years)	$20,000
	Accumulated Depreciation - Machinery		$20,000
	(To record the depreciation for the first year)
b) 1 Jul. 2019	Revaluation Loss	$5,000
	Machinery ($100,000 - $20,000 = $80,000 - $75,000)		$5,000
	(To record the revaluation loss on machinery due to fair value)
c) 30th Jun. 2020	Depreciation Expense ($75,000-$0/4 years)	$18,750
	Accumulated Depreciation - Machinery		$18,750
	(To record the depreciation for the second year)
d) 1 Jul. 2020	Cash	$89,000
	Accumulated Depreciation - Machinery ($20,000 + $18,750)	$38,750
	Machinery ($100,000 - $5,000)		$95,000
	Gain on sale of Machinery ($89,000 + $38,750 - $95,000)		$32,750
	(To record the sale of machinery at gain)