Question

The following information was derived from the book of Fast Ltd on 30 June 2019.

Plant Vehicle

Carrying amount ? $64,000

Fair value $276,000 $63,000

Value in use $260,000 $63,200

Cost of disposal $4,000 $500

Additional information:

(a) Fast Ltd depreciates all of its Property, Plant & Equipment items at 10% per annum using the straight-line method with zero residual value.

(b) The Asset Revaluation Surplus for plant has a credit balance of $7,000 on 30 June 2019, as the result of a revaluation increment on 30 June 2018.

(c) Plant was purchased on 1 July 2016 for $400,000.

(d) The recoverable amount of vehicle is determined to be $56,500 on 30 June 2020. The vehicle was initially purchased at cost of $80,000.

(e) Fast Ltd applies revaluation model for plant and cost model for vehicle.

(f) The tax rate is 30%.

(g) Fast Ltd’s financial year ends on 30 June each year.

Required:

Prepare the journal entries on 30 June 2019 and 30 June 2020 in relation to the items of Property, Plant & Equipment in accordance to IAS 16/AASB 116 and IAS 36/AASB 136. Show all workings. Narrations for the journal entries are required.

not given

Answer 1

Workings: -

1.

	Plant ( Revaluation model )
	Cost of plant	400000
Less	Depreciation @10% SLM
	30-Jun-17	40000
	30-Jun-18	40000
	30-Jun-19	40000
	Carrying value as on 30-06-2019	280000
	Fair value	276000
	Revaluation loss (fair value less carrying value)	4000
	Revaluation surplus as on 06/30/19	7000

2.

Vehicle ( Cost model )
Particulars	$	$
Carrying value as on 30-06-2019		64000
Recoverable amount greater of following		$63,200
a)Value in use	$63,200
b) Fair value less cost of disposal	$62,500
Impairment loss (Carrying value less recoverable amount)		800

Journal entries as on 31th June, 2019,

Date	Particulars	Debit	Credit
06/30/2019	Revaluation surplus	$4,000
	Plant		$4,000
	[Plant revalued to its fair value]
06/30/2019	Impairment loss	$800
	Vehicle		$800
	[Impairment loss on Vehicle recorded]