Accounting Practice Questions and Solutions

Question 1
Year ending 30 June 2018
Date Description Debit Credit
30-Jun-18 Nuclear power generator asset $ 16,551,500.00
Cash $ 16,551,500.00
30-Jun-18 Nuclear power generator asset $ 809,640.91
Asset retirement obligation $ 809,640.91
Year ending 30 June 2019
Date Description Debit Credit
30-Jun-19 Finance cost $ 80,964.09
Asset retirement obligation $ 80,964.09
Year ending 30 June 2024
Date Description Debit Credit
30-Jun-24 Finance cost $ 130,393.48
Asset retirement obligation $ 130,393.48
Working note for calculating finance cost for the year 2024
Year Asset retirement obligation Finance cost Asset retirement obligation closing
2018 $ 809,640.91 0 $ 809,640.91
2019 $ 809,640.91 $ 80,964.09 $ 890,605.00
2020 $ 890,605.00 $ 89,060.50 $ 979,665.50
2021 $ 979,665.50 $ 97,966.55 $ 1,077,632.05
2022 $ 1,077,632.05 $ 107,763.20 $ 1,185,395.25
2023 $ 1,185,395.25 $ 118,539.53 $ 1,303,934.78
2024 $ 1,303,934.78 $ 130,393.48 $ 1,434,328.26
2025 $ 1,434,328.26 $ 143,432.83 $ 1,577,761.08
2026 $ 1,577,761.08 $ 157,776.11 $ 1,735,537.19
2027 $ 1,735,537.19 $ 173,553.72 $ 1,909,090.91
2028 $ 1,909,090.91 $ 190,909.09 $ 2,100,000.00
Question 2
Straight line method

year ending Depreciation expenses
30-Jun-16 $ 10,000.00
30-Jun-17 $ 10,000.00
30-Jun-18 $ 10,000.00
30-Jun-19 $ 10,000.00
30-Jun-20 $ 10,000.00
30-Jun-21 $ 10,000.00
The sum of digits method
year ending Depreciation expenses
30-Jun-16 $ 17,142.86
30-Jun-17 $ 14,285.71
30-Jun-18 $ 11,428.57
30-Jun-19 $ 8,571.43
30-Jun-20 $ 5,714.29
30-Jun-21 $ 2,857.14
Declining balance method
Declining balance depreciation rate 34.79%
year ending Depreciation expenses Declined balance of asset
30-Jun-16 $ 22,610.71 $ 42,389.29
30-Jun-17 $ 14,745.41 $ 27,643.87
30-Jun-18 $ 9,616.12 $ 18,027.76
30-Jun-19 $ 6,271.08 $ 11,756.67
30-Jun-20 $ 4,089.64 $ 7,667.03
30-Jun-21 $ 2,667.03 $ 5,000.00
Units of production method
year ending Depreciation expenses
30-Jun-16 $ 6,829.27
30-Jun-17 $ 8,292.68
30-Jun-18 $ 10,243.90
30-Jun-19 $ 13,414.63
30-Jun-20 $ 16,585.37
30-Jun-21 $ 4,634.15
Question 3

a. Recoverable value is maximum of
(Fair value-cost of sales) or (value in use)
Value in use Fair value Recoverable value
30-Jun-17 $ 1,050,000.00 $ 950,000.00 $ 1,050,000.00
30-Jun-18 $ 960,000.00 $ 950,000.00 $ 960,000.00
30-Jun-19 $ 900,000.00 $ 970,000.00 $ 970,000.00
b. Calculation of revaluation gain of loss
Recoverable value
Carrying value before
revaluation Revaluation gain/(loss)
30-Jun-17 $ 1,050,000.00 $ 1,000,000.00 $ 50,000.00
30-Jun-18 $ 960,000.00 $ 1,050,000.00 $ (90,000.00)
30-Jun-19 $ 970,000.00 $ 960,000.00 $ 10,000.00
Required journal entries
Date Description Debit Credit
30-Jun-17 Land asset $50000
Revaluation reserve $50000
30-Jun-18 Revaluation reserve $50000
Loss on asset revaluation $40000
Land asset $90000
30-Jun-17 Land asset $10000
Revaluation reserve $10000
c. Calculation of revaluation gain of loss
Recoverable value Carrying value before revaluation Revaluation gain/(loss)
30-Jun-17 $ 1,050,000.00 $ 1,000,000.00 $ 50,000.00
30-Jun-18 $ 960,000.00 $ 1,050,000.00 $ (90,000.00)
30-Jun-19 $ 970,000.00 $ 960,000.00 $ 10,000.00
Required journal entries
Date Description Debit Credit
30-Jun-17 Land asset $50000
Revaluation reserve $50000