Financial Accounting: Machine Depreciation, Revaluation, and Disposal

This accounting assignment addresses the depreciation, revaluation, and disposal of machinery. The solution begins with journal entries for the purchase of two machines, Machine A and Machine B, followed by depreciation calculations using the straight-line method. It includes entries for depreciation expenses, and adjustments are made for revaluation gains and losses. The assignment further details the impact of repairs on Machine B, adjusting its useful life and residual value. The final part of the assignment involves the disposal of Machine A through a trade-in for a new Machine C, including the calculation of any gain or loss on disposal. Workings are provided to support each calculation. The second question covers revaluation and impairment accounting, including journal entries and calculations for land, plant, and equipment. The solution details the revaluation loss on land and the impairment loss on non-current assets, providing a comprehensive analysis of accounting treatments for asset valuation changes. The assignment follows the specified accounting standards and provides a detailed breakdown of all transactions and adjustments.

Running head: COMPANY ACCOUNTING
Company Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1COMPANY ACCOUNTING
Table of Contents
Question 1:.................................................................................................................................2
Question 2:.................................................................................................................................7
Requirement a:.......................................................................................................................7
Requirement b:.......................................................................................................................8
Bibliography:..............................................................................................................................9

2COMPANY ACCOUNTING
Question 1:
Date Particulars Debit (in $) Credit (in $)
01/01/201
8
Machine A Account.................................Dr
Machine B Account..................................Dr
To Cash Account
(Purchase of Machine A and Machine B for
cash)
4,000
10,000
14,000
30/06/201
8
Depreciation Account..............................Dr
To Machine A Account
To Machine B Account
(To record depreciation charge)
665
190
475
30/06/201
8
Profit and Loss Account...........................Dr
To Depreciation Account
(To record accounting for depreciation)
665
665
30/06/201
9
Depreciation Account..............................Dr
To Machine A Account
To Machine B Account
(To record depreciation charge)
1,330
380
950
30/06/201
9
Profit and Loss Account...........................Dr
To Depreciation Account
(To record accounting for depreciation)
1,330
1,330
30/06/201
9
Loss on Revaluation Account...................Dr
To Machine Account
(To record loss accounted on revaluation)
230
230

3COMPANY ACCOUNTING
30/06/201
9
Machine B Account..................................Dr
To Gain on Revaluation Account
(To record gain accounted on revaluation)
425
425
02/01/202
0
Repairs on Machine B Account................Dr
To Cash Account
(To record repairs carried out)
6,600
6,600
31/03/202
0
Depreciation Account..............................Dr
To Machine A Account
(To record depreciation charge)
95.31
95.31
31/03/202
0
Profit and Loss Account...........................Dr
To Depreciation Account
(To record accounting for depreciation)
95.31
95.31
31/03/202
0
Machine C Account..................................Dr
To Machine A Account
To Cash Account
To Installation and Transportation
Account
(To record purchase of Machine C)
6,495
2,800
3,600
95
31/03/202
0
Profit and Loss Account...........................Dr
To Loss on Sale of Machine A
Account
(To record accounting for loss)
819.67
819.67
30/06/202
0
Profit and Loss Account...........................Dr
To Machine C Account
819.67
177.97

4COMPANY ACCOUNTING
To Machine B Account
(To record charge for depreciation)
641.70
30/06/202
0
Profit and Loss Account...........................Dr
To Depreciation Account
(To record accounting for depreciation)
819.67
819.67
30/06/202
0
Loss on Revaluation Account...................Dr
To Machine B Account
(To record loss on revaluation)
420.80
420.80
30/06/202
0
Machine C Account..................................Dr
To Gain on Revaluation Account
(To record gain on revaluation)
182.97
182.97
Workings:
01.01.2018:
Cost of Machine A = $4,000
Cost of Machine B = $10,000
Salvage value of Machine A = $200
Salvage value of Machine B = $500
Useful life for Machine A and Machine B = 10 years
Depreciation = (Purchase value – Salvage value)/Number of years
Annual depreciation of Machine A = ($4,000 - $200)/10 = $380

5COMPANY ACCOUNTING
Depreciation of Machine B = ($10,000 - $500)/10 = $950
Value of Machine A as on 01/01/2018 = $4,000
Depreciation of Machine A as on 30/06/2018 = ($4,000 - $200) x 6/12 = $190
Value of Machine B as on 01/01/2018 = $10,000
Depreciation of Machine B as on 30/06/2018 = ($10,000 - $500) x 6/12 = $475
Value of Machine A as on 01/07/2018 = ($4,000 - $190) = $3,810
Depreciation of Machine A (01/07/2018 – 30/06/2019) = $380
Value of Machine A as on 30/06/2019 = $3,810 - $380 = $3,430
Value of Machine B as on 01/07/2018 = ($10,000 - $475) = $9,525
Depreciation of Machine B (01/07/2018 – 30/06/2019) = $950
Value of Machine B as on 30/06/2019 = $9,525 - $950 = $8,575
Fair value of Machine A = $3,200
Revaluation Loss on Machine A = $3,200 - $3,430 = ($230)
Fair value of Machine B = $9,000
Revaluation Gain on Machine B = $9,000 - $8,575 = $425
Value of Machine A as on 01/07/2019 = $3,200
Salvage value of Machine A = $150
Useful life of Machine A = 8 years
Depreciation of Machine A until 31/12/2019 = ($3,200 - $150)/8 = $190.63

6COMPANY ACCOUNTING
Value of Machine A as on 01/01/2020 = $3,200 - $190.63 = $3,009.38
Value of Machine B as on 01/07/2019 = $9,000
Salvage value of Machine B = $400
Useful life of Machine B = 8 years
Depreciation of Machine B until 31/12/2019 = ($9,000 - $400)/8 = $537.50
Value of Machine B as on 01/01/2020 = $9,000 - $537.50 = $8,462.50
Repairs expense of Machine B as on 02/01/2020 = $6,600
Value of Machine B = $8,462.50 + $6,600 = $15,062.50
Increase in useful life of Machine B = 3.5 years
Total useful life of Machine B = 8 + 3.5 = 11.5 years
Residual value of Machine B = $945
Annual depreciation of Machine B = ($15,062.50 - $945)/11.5 = $1,283.41
Depreciation of Machine B as on 30/06/2020 = $1,283.41 x 6/12 = $641.70
Value of Machine B as on 30/06/2020 = $15,062.50 - $641.70 = $14,420.80
Value of Machine A as on 02/01/2020 = $3,009.38
Depreciation of Machine A until 31/03/2020 = $3,009.38 x 3/12 = $95.31
Net value of Machine A = $3,009.38 - $95.31 = $2,914.06
Exchange of Machine C = $2,800
Loss on exchange = $2,914.06 - $2,800 = $114.06

7COMPANY ACCOUNTING
Value of Machine C as on 31/03/2020 = $6,495
Salvage value of Machine C = $800
Useful life of Machine C = 8 years
Annual depreciation of Machine C = ($6,495 - $800)/8 = $711.88
Depreciation of Machine C as on 30/06/2020 = $711.88 x 3/12 = $177.97
Value of Machine C as on 01/07/2020 = $6,495 - $177.97 = $6,317.03
Fair value of Machine C = $6,500
Revaluation gain on Machine C = $6,500 - $6,317.03 = $182.97
Depreciation of Machine B as on 30/06/2020 = $641.70
Fair value of Machine B = $14,000
Revaluation gain on Machine B = $14,000 - $14,420.80 = ($420.80)
Question 2:
Requirement a:
Serial Number Particulars Debit (in $) Credit (in
$)
1 Revaluation Account..............Dr
Impairment Account..................Dr
To Land Account
To Assets Account
12,200 ($51,200 - $39,000)
407,200
39,200
407,200

8COMPANY ACCOUNTING
Requirement b:
Serial Number Particulars Debit (in $) Credit (in
$)
1 Impairment Loss Account................Dr
To Plant and Equipment Account
16,000 (256,000 – 240,000)
16,000
The adjustments required could not be written down below fair value; however, it
could be carried at an amount higher than the fair value.
Workings:
Land $51,200
Less: Fair value of land $12,000
Revaluation loss on land $39,200
Depreciation on non-current assets $395,200 ($77,600 + $17,600 + $300,000)
Written down value of assets including land $582,400
Less: Fair value of land $12,000
Written down value of assets than land $570,400
Total non-current asset other land $977,600
Less: Written down value other land $570,400
Impairment loss $407,200

9COMPANY ACCOUNTING
Bibliography:
Loftus, J., Leo, K.J., Daniluc, S., Boys, N., Luke, B., Ang, H.N., & Byrnes, K. (2019).
Financial Reporting, 3rd End. John Wiley & Sons, Milton, Queensland, Australia.