Question
In: Accounting
On 1 July 2018, Adat Ltd. purchased land for $1,200,000 and buildings for $500,000 paying cash....
On 1 July 2018, Adat Ltd. purchased land for $1,200,000 and buildings for $500,000 paying cash. The estimated useful life of the buildings was 40 years, with $20,000 residual value.
On 1 October 2018 machinery was purchased for cash at a total cost of $117,000. Installation costs of $3,000 were also paid. The estimated useful life of the machinery was 4 years with an estimated residual value of $8,000. Adat Ltd. uses straight line depreciation. The entity’s balance date is 30 June.
Required:
1. Prepare journal entries to record the purchase of assets and the depreciation expense for the year ended 30 June 2019. [6 marks]
2. On 30 June 2019 the entity conducted an impairment test on the buildings. The fair value was assessed at $460,000 with estimated costs to sell of $20,000. The value in use was estimated at $450,000. Determine if the asset is impaired and prepare the impairment journal entries if required. [4 marks]
- On 1 July 2019 Adat decided to revalue the land to $1,400,000. Prepare the journal entry for the revaluation. [2 marks]
- On 31 December 2019, owing to a change of product mix the machinery was sold for $80,000. Prepare the journal entry(ies) to dispose of the machinery. [4 marks]
- If Adat had to revalue the land downwards by $300,000 one year later, explain how you would account for this revaluation? [3 marks]
Solutions
ekkarill92 answered 2 years agoRelated Solutions
On 1 July 2018 Alto Ltd purchased land for $4 000 000, in cash. Alto Ltd...
On 1 July 2018 Alto Ltd purchased land for $4 000 000, in cash.
Alto Ltd uses the cost model to account for land.
On 1 July 2018 Alto Ltd purchased equipment for $1 000 000, in
cash. Alto Ltd uses the revaluation model to account for equipment
and depreciates the asset over its estimated useful life of 5 years
using the straight-line method. The disposal value at the end of 5
years was assessed as zero.
The following information...
Suzy purchased 2 acres of vacant land in 2018 by paying $4,000 in cash at closing...
Suzy purchased 2 acres of vacant land in 2018 by paying $4,000
in cash at closing and borrowing $40,000 to be repaid at $8,000 per
year for the next 5 years with interest on the unpaid balance at
10%. As part of the purchase agreement, Suzy agreed to let the
seller store farm equipment on the land for 2 years (rental value
of $1,000 per year). Suzy also pays legal, survey and title
abstract fees of $700 on the purchase....
On July 31, 2018, a company purchased a two-year insurance policy for $27,000, paying cash and...
On July 31, 2018, a company purchased a two-year insurance
policy for $27,000, paying cash and debiting Prepaid Insurance for
the entire two-year premium amount. The adjusting entry on December
31, 2018 includes a:
credit to Prepaid Insurance $5,625.
credit to Insurance Expense $5,625.
debit to Prepaid Insurance $6,750.
debit to Insurance expense $6,750.
On July 1, 2016, Gissel Corporation purchased Mills Company by paying $525,000 cash. At July 1,...
On July 1, 2016, Gissel Corporation purchased Mills Company by
paying $525,000 cash. At July 1, 2016, the balance sheet of Mills
Company was as follows.
Cash $50,000 Accounts Payable $200,000
Accounts Receivable $90,000 Stockholder’s Equity $225,000
Inventory $100,000
Land $40,000
Buildiings 75,000
Equipment $70,000
Total $425,000 Total $425,000
The recorded amounts all approximate current values except for
land (fair value of $60,000) and inventory (fair value of
$110,000). They also acquired a patent from Mills company with a
fair...
Basie Ltd purchased a building at a cost of $1,200,000 on 30 June 2018. The building...
Basie Ltd purchased a building at a cost of $1,200,000 on 30
June 2018. The building is depreciated on a straight-line basis
over 10 years with zero residual value. Basie Ltd values the
building using the Revaluation (Fair Value) Model. On 30 June 2019,
Basie Ltd revalued the building to its fair value of
$1,350,000.
a) Provide the journal entries to record the revaluation of the
building on 30 June 2019. Show all workings necessary to determine
your answer.
Humorous Ltd had cash and cash equivalents at 1 July 2018 of $ 1,400,000. The transactions...
Humorous Ltd had cash and cash
equivalents at 1 July 2018 of $ 1,400,000. The transactions of
Humorous Ltd for the year to 30 June 2019 are as follows:
Borrowed $180,000 with a 6-month loan payable.
Received $2,280,000 cash from accounts receivable.
Sold for $240,000 cash a plant asset with a carrying amount of
$160,000.
Issued ordinary shares for $720,000 cash.
Purchased a plant asset for $530,000; $162,000 in cash and
$368,000 on loan.
Exchanged 90,000 shares for land with...
On March 1, 2010, Packard Company purchased land for an office site by paying $600,000 cash....
On March 1, 2010, Packard Company purchased land for an office
site by paying $600,000 cash. Packard began construction on the
office building one year later on March 1, 2011. The following
expenditures were incurred for construction on each of the
respective dates: Date Amount March 1, 2011 $680,000 April 1, 2011
$352,000 May 1, 2011 $450,000 June 1, 2011 $520,000 The office was
completed and ready for occupancy on July 1. To help pay for
construction, $400,000 of common...
Fox Ltd has purchased a truck on 1 July 2018. The list price of the truck...
Fox Ltd has purchased a truck on 1 July 2018. The list price of
the truck was $200,000 but Fox Ltd was invoiced and paid only
$180,000. Fox Ltd did have to pay for an inspection costing $30,000
on 1 July 2018 before the truck could be used for the first time.
In addition, the company purchased an annual insurance policy for
the truck costing $24,000 (recorded using the asset approach). The
truck will be depreciated using the reducing balance...
On 1 July 2018, ABC Ltd purchased and recorded equipment at its cost of acquisition of...
On 1 July 2018, ABC Ltd purchased and recorded equipment at its
cost of acquisition of $320 000. The equipment is expected to have
a useful life for seven years and an estimated residual value of
$10 000. ABC Ltd depreciates the asset using the straight-line
method. ABC Ltd uses the revaluation model to equipment and records
accumulated depreciation using the net method. The reporting period
end of ABC Ltd is 30 June. ABC Ltd revalued the equipment on 30...
On 1 July 2018, ABC Ltd purchased and recorded equipment at its cost of acquisition of...
On 1 July 2018, ABC Ltd purchased and recorded equipment at its
cost of acquisition of $320 000. The equipment is expected to have
a useful life for seven years and an estimated residual value of
$10 000. ABC Ltd depreciates the asset using the straight-line
method. ABC Ltd uses the revaluation model to equipment and records
accumulated depreciation using the net method. The reporting period
end of ABC Ltd is 30 June. ABC Ltd revalued the equipment on 30...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- JAVA Write a test program that prompts the user to enter a series of integers and...
- (2) Cite an example on how organizations like Google, Facebook, Youtube etc collect data for image...
- The legal landscape is perpetually changing. Psychologists must remain abreast of these changes to avoid potentially...
- We are evaluating a project that costs $1.68 million, has a six-year life, and has no...
- In C++ Having call-by-reference allows one to use storeback parameters, i.e., parameters whose values are transmitted...
- You must evaluate a proposal to buy a new milling machine. The base price is $175,000,...
- “Triangle Guessing” game in Python The program accepts the lengths of three (3) sides of a...
ADVERTISEMENT