Question

On 1 July 2014, Atropos Company purchased a depreciable asset at a cost of $1.2 million. The asset had an estimated useful life of 12 years and was depreciated on a straight-line basis. The recoverable amounts of the asset were as follows:

2015 - 1000,000

2016 - 900 000

2017- 800,000

2018 - 850,000

indicators of impairment were identified on 30 June 2015, 2016 and 2017, while indicators of a reversal of impairment were found on 30 June 2018. The asset was sold on 1 July 2018 for $860 000. Required Assuming that the company adopts the cost model for accounting for non-current assets and complies with AASB 116 ‘Property, Plant and Equipment’ and AASB 136 ‘Impairment of Assets’, show the general journal entries for the asset from 1 July 2014 to 1 July 2018.

Answer 1

Date	Account	Debit	credit
1July 2014	Depreciable asset	1,200,000
	cash		1,200,000
	[Being asset purchased recorded]
30 june 2015	Depreciation expense	100000
	Accumulated depreciation-Depreciable asset		100000
30june 2015	Impairement loss	100000
	Accumulated impairmentloss		100000
	[Being impairment loss recorded]

30 june 2016	Depreciation expense	90909
	Accumulated depreciation-Depreciable asset		90909
30 june 2016	impairement loss	9091
	Accumulated impairment loss		9091
30 june 2017	depreciation expxense	90000
	Accumulated depreciation-Depreciable asset		90000
30 june 2017	Impairment loss	10000
	Accumulated impairement loss		10000
30 june 2018	Depreciation expense	88889
	Accumulated depreciation-Depreciable asset		88889
30 june 2 018	accumulated impairment loss	119091
	Depreciable asset	19798
	Gain in value of depreciable asset		119091
	revaluation reserve		19798
	[being impairement gain recorded]
1 july 2018	cash	860000
	Accumulated depreciation-Depreciable asset	369798
	Depreciable asset		1219798
	Gain on sale of asset		10000
	[being asset sold at gain]

**Depreciation : 1,200,000/12 =100,000

depreciation for [1july 2014-30june 2015] :100000

carrying value at end of 31 dec 2015 :cost -accumulated depreciation

              = 1,200,000-100000

              = 1,100,000

Impairment loss = recoverable amount -carrying value

                = 1,000,000-1,100,000

                 = 100,000

since carrying value is more than recoverable amount ,asset is impaired

**depreciation for 2016 :carrying value /remaining useful life

                  =1000000/11                                                  [12-1 =11 years]

                   = 90909

**carrying value at 30 june 2016 : 1,000,000-90,909 = 909091

impairement loss :900,000 -909,091 = -9091

**depreciation for 30 june 2017 :900000/10 = 90000    [ 12-1-1 =10]

carrying value at 30 june 2017 :900000-90000= 810000

impairment loss : 800000-810000= -10000

**depreciation for 30 june 2018 :800000/9 =    88889                               [12-1-1-1= 9]

carrying value at 30june 2018 : 800000-88889 = 711111

Impairment gain : 850000-711111 = 138889    (restricted to 119091]

Impairment gain will be recorded up to amount of loss charged in income statement [100000+9091+10000]=119091 .extra gain will be recorded to revaluation reserve .138889-119091= 19798

**accumulated depreciation as on 1july 2018:100000+90909+90000+88889=369798

value of depreciable asset :1,200,000+19798 (revaluation) = 1219798