Accounting for Bus Revaluation and Sales

The assignment content discusses the revaluation of a bus's life from 10 years to 5 years, resulting in depreciation of $75,000. The bus was then sold for $105,000 on July 1, 2008, at a loss of $70,000. Journal entries were passed to record depreciation, sale, and loss. Additionally, the assignment provides journal entries for Indoor Décor and Furnishing Store's March transactions, including receipt of payment, purchase of sofas, sales, consultancy services, settlement of accounts, and depreciation booking.

ACCOUNTING ASSIGNMENT
Student’s Name:

Table of Contents
Answer to Question 1............................................................................................................................2
Part a.................................................................................................................................................2
Part b)................................................................................................................................................3
Part c.................................................................................................................................................3
Answer to Question 2............................................................................................................................5
References.............................................................................................................................................7
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Answer to Question 1
This case study would help us to know the provisions relating to the AASB 116.
Part a
On 1st January 2005 Barbari Ltd had purchased a new bus at a list price of $330,000
(Inclusive of GST). GST Rate in Australia during that period was 10%. Hence the base price
at which the bus was purchased was $330,000/110% = $300,000. (AASB, 2017)
This new bus was purchased by the company by paying $260,000 and the balance amount
was paid in exchange of the old bus which they were having it. The historical cost of the old
bus was $250,000 and the accumulated depreciation was $190,000. Hence the net value of
the old bus was $250,000 - $190,000 = $60,000. This shows that the total amount paid by the
company for the new bus was $260,000 + $60,000 = $320,000
The journal entries which needs to be passed in this case as per AASB 116 is given below:
Journal Entries Dr Cr
New Bus a/c Dr $300,000
GST a/c/ Dr $30,000
To Creditor a/c $330,000
Journal Entries Dr Cr
Creditor a/c Dr $330,000
Accumulated Depreciation a/c Dr $190,000
To Bank a/c $260,000
To Old Bus a/c $250,000
To Profit on exchange of asset $10,000
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Part b)
In this part we need to calculate the revaluation of the new bus which was purchased by the
company. The price at which the bus was purchased by the company was $300,000 on 1st
January 2005. The expected useful life of the bus was 5 years. Company was following the
accelerated method of depreciation. The depreciation would be 1.5 times the straight line rate.
As per the straight line method the life of the company was 5 years. Hence as per the
accelerated method of depreciation, the life of the bus would be 6 years. Yearly depreciation
for the new bus would be $300,000/6 years which would be $50,000 every year.
(Legislation.gov.au, 2017)
Hence the net value of the new bus as on 31st December 2016 would be $300,000 –
($50,000*2) = $300,000 - $100,000 = $200,000.
Now on 1st January 2007 the new bus is being revalued at $250,000. Hence it can be seen that
the asset would be revalued for $50,000 more than the current net value of the asset.
The journal entry for the revaluation is given below:
Journal Entries Dr Cr
New Bus $50,000
To Revaluation Surplus $50,000
Part c
Now after revaluing the new bus, company had planned to sell this bus in July 2008.
Whenever an asset is revalued, its accumulated depreciation has to be taken from the date on
which the assets were revalued. In the present case bus was revalued on 1st Jan 2007. Net
book value of the bus on that date was $250,000. Exactly after 18 months bus was sold to
some other customer. So that means depreciation has to be calculated on 18 months before
selling off the bus. After the bus was revalued, its useful life also got changed. Earlier the
total useful life of the bus of 6 years, but now from the date of revaluation the life of the bus
has been reassessed to 5 years. This means that the life of the bus would end on 31st
December 2011. But on 1st July 2008 itself the bus was sold. Hence the depreciation on the
bus would come to ($250,000/5)*1.5 = $75,000 (Australia, 2017)
Hence the net book value of the asset as on 30th June 2008 would be $250,000 - $75,000 =
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$175,000. Now on 1st July 2008, company had to unexpectedly sold the bus for $105,000.
Hence the bus was sold at a loss of $70,000. Following Journal entries needs to be passed for
the same: (charteredaccountantsanz, 2017)
Journal Entries Dr Cr
Depreciation a/c Dr $75,000
To Accumulated Depreciation $75,000
Bank a/c Dr $105,000
Accumulated Depreciation a/c Dr $75,000
Loss on sale of asset $70,000
To Bus a/c $250,000
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Answer to Question 2
Journal entries for March transactions for Indoor Décor and Furnishing Store are given
below: (allinterview, 2017)
Date Journal Entries Dr Cr
March 3 Bank a/c Dr $2,900
To Customer a/c $2,900
(being money received for job completion)
Date Journal Entries Dr Cr
March 6 Sofa a/c Dr $28,800
Freight a/c Dr $1,800
To Creditors $30,600
(being 120 sofa purchased on credit)
Date Journal Entries Dr Cr
March 14 Debtor a/c Dr $27,625
To Sales a/c/ $27,625
(being 65 sofas sold on credit)
Date Journal Entries Dr Cr
March 18 Debtor a/c Dr $1,700
To Consultancy Fee a/c $1,700
(Being consultancy services given on credit)
Date Journal Entries Dr Cr
March 21 Table Lamps a/c/ Dr $1,250
To Bank a/c $1,250
(Being 50 table lamps purchased)
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Date Journal Entries Dr Cr
March 24 Bank a/c Dr $27,625
To Debtors a/c $27,625
(Being accounts settled for Ancora Hotels)
Date Journal Entries Dr Cr
March 28 Bank a/c Dr $875
To Table Lamps a/c $750
To profit on sale of asset $125
(being table lamps sold at profit)
Date Journal Entries Dr Cr
March 31 Depreciation on plant & equipment a/c Dr $150
To Acc Dep on plant & equipment a/c $150
(being depreciation booked)
Date Journal Entries Dr Cr
March 31 Physical count loss Dr $240
To Sofa $240
(Being single sofa lost)
Date Journal Entries Dr Cr
March 31 Bad Debt a/c Dr $664
To Debtors a/c $664
(bad debt booked)
(accounting-simplified, 2017)
References
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