Exercise 11.22 (Applying IFRS - 3e):
Hamburg Trading operates in a competitive field. To maintain its market position, it purchased 2 new machines for cash on 1st Jan 2013. It had previously rented its machines. Machine A cost $40,000 and Machine B cost $100,000. Each machine expected to have a useful life of 10 years, and residual values were estimated at $2,000 for Machine A and $5,000 for Machine B.
On 30 June 2014, Hamburg Trading adopted the revaluation model to account for the class of machinery. The FV of Machine A and Machine B were determined to be $32,000 and $90,000 respectively on that date. The useful life and residual value of the Machine A were reassessed to 8 years and $1,500. The useful life and residual of Machine B were reassessed to 8 years and $4,000.
On 2 Jan 2015, extensive repairs were carried out on Machine B for $66,000 cash. Hamburg Trading expected these repairs to extend Machine B's useful life by 3.5 years, and it revised Machine B's estimated residual value to $9,450.
Owing to technological advances, Hamburg Trading decided to replace Machine A. It traded in Machine A on 31 Mar 2015 for new Machine C, which cost $64,000. A $28,000 trade-in was allowed for Machine A, and the balance of Machine C's cost was paid in cash. Transport and installation costs of $950 were incurred in respect to Machine C. Machine C was expected to have a useful life of 8 years and a residual value of $8,000.
Hamburg Trading uses the straight-line depreciation method, recording depreciation to the nearest month and the nearest dollar. The end of its reporting period is 30 June.
On 30 June 2015, FVs were determined to be $140,000 and $65,000 for Machine B and C respectively.
Required
Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June 2013. (Narrations are not required but show all workings.)
Sách chỉ có bài tập mà không có đáp án. Tuy nhiên, mình có mua tài liệu giải các bài tập này trên mạng, nên độ tin cậy ko cao. Mình copy lời giải của đáp án đó vào đây để các bạn tham khảo. Theo mình là lời giải thiếu bút toán chuyển từ ARV sang REs của chênh lệch khấu hao theo FV và based on cost.
Exercise 11.22 ACQUISITIONS, REVALUATIONS, REPLACEMENTS, DEPRECIATION
Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June 2013. (Narrations are not required but show all workings.)
Hamburg Trading
1. GENERAL JOURNAL ENTRIES
DATE
DETAILS
Dr
Cr
2013
Jan 1
Machine A
40 000
Machine B
100 000
Cash
140 000
June 30
Depreciation – Machinery
6 650
Accumulated Depreciation – Machinery
6 650
(A:[ $40 000 – $2000]/10 x 6/12 = $1900 +
B: [$100 000 – $5000]/10 x 6/12 = $4750)
2014
June 30
Depreciation – Machinery
13 300
Accumulated Depreciation – Machinery
13 300
(A: $40 000 – $2000/10 = $3800 +
B: $100 000 – $5000/10 = $9500)
Accumulated Depreciation – Machinery
Machine A
(Writing down to carrying amount)
5 700
5 700
Loss on revaluation - Machinery (P&L)
2 300
Machine A
2 300
Machine A: Carrying amount $34 300 =40 000 – 5700
Fair value $32 000
Revaluation decrease $2300)
Accumulated Depreciation – Machinery
Machine B
(Writing down to carrying amount)
Machine B
14 250
4 250
14 250
Gain on revaluation of Machine B (OCI)
(Machine B: Carrying amount $85 750 =$100000 – $14 250
Fair value $90 000
Revaluation increase $4250)
Income tax expense (OCI)
Deferred tax liability
(Tax effect of gain on revaluation)
1 275
4 250
1 275
Gain on revaluation of Machine B (OCI)
4 250
Income tax expense (OCI)
1 275
Asset revaluation surplus – Machine B
2 975
(Accumulation of net revaluation gain in equity)
2015
Jan 2
Depreciation – Machine B
5 375
Accumulated depreciation – Machine B
5 375
(Depreciation to date of overhaul:
[$90 000 – $4000]/8 x 6/12 = $5375)
Accumulated depreciation - Machine B
5 375
Machine B
5 375
Machine B
66 000
Cash
66 000
Mar 31
Depreciation – Machine A
2 859
Accumulated depreciation – Machine A
2 859
(Depreciation to date of sale:
[$32 000 – $1500]/8 x 9/12 = $2859)
Accumulated depreciation – Machine A
2 859
3
Machine A
32 000
Machine C
64 000
Cash
36 000
Loss on sale of Machine A
1141
(Trade-in of Machine A as part cost of Machine C)
Machine C
950
Cash
950
(Installation costs on Machine C)
June 30
Depreciation – Machine B
6 417
Accumulated depreciation – Machine B
(Depreciation of machine B:
6 417
($90 000 – $5375 + $66 000 – $9450 = $141 175
$141 175/[8 – 0.5 + 3.5] x 6/12 = $6417)
Depreciation – Machine C
1 780
Accumulated depreciation – Machine C
(Depreciation of Machine C:
1 780
[$64 950 – 8000]/8 x 3/12 = $1780)
Accumulated depreciation – Machine B
Machine B
(Writing down to carrying amount)
6 417
6 417
Loss on revaluation of Machine B (OCI)
4 208
Machine B
4 208
(Machine B:
Carrying amount $144 208= $150 625 - $6417
Fair value $140 000
Revaluation decrease $4208)
Deferred tax liability
Income tax expense (OCI)
(Tax effect on devaluation of asset previously revalued upwards)
Asset revaluation surplus – Machine B
Income tax expense (OCI)
Loss on revaluation of Machine B
(Accumulation of net loss to equity)
1 262
2 946
1 262
1 262
4 208
Accumulated depreciation – Machine C
Machine C
(Writing down to carrying amount)
Machine C
Gain on revaluation of Machine C (OCI)
(Machine C: Carrying amount $63 170 [64 950 – 1780]
Fair value $65 000
Revaluation increase $1830)
1 780
1 830
1 780
1 830
Income tax expense (OCI)
Deferred tax liability
(Tax effect of revaluation increment)
Gain on revaluation of Machine C (OCI)
Income tax expense (OCI)
549
1 830
549
549
Asset revaluation surplus – Machine C
1 281
