Accounting 2007 Assignment: Depreciation, Revaluation and Impairment

This accounting assignment solution addresses depreciation, revaluation, and impairment of assets. Question 1 involves calculating depreciation for machinery using different methods, considering revaluation, and accounting for asset disposals and additions. It includes journal entries and calculations for depreciation expense, accumulated depreciation, and losses/gains on revaluation and disposal. Question 2 focuses on the revaluation and impairment of land and other non-current assets. It presents journal entries for revaluation losses, impairment of goodwill, and impairment of other assets, and includes calculations to determine the impaired values and the allocation of impairment losses across assets. Part B explores the accounting treatment when the fair value of a plant and machinery is below its carrying value and the need for impairment loss recognition.

Running head: ACCOUNTING-2007
ACCOUNTING-2007
Name of the Student
Name of the University
Author Note:

1ACCOUNTING-2007
Table of Contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................6
Part A.........................................................................................................................................6
Part B..........................................................................................................................................7

2ACCOUNTING-2007
Question 1
On 1st January, 2018
DR ($) CR ($)
Machinery A/c ($4000+$10000) $14000
Cash $14000
Machine A & Machine B purchased
On 30th June, 2018
Depreciation {(4000-200)/10+(10000-500)/10}/6 $665
Accumulated depreciation $665
Accumulated Depreciation $190
Machine A $190
Depreciation charged on machinery
Accumulated Depreciation $475
Machine B $475
Depreciation charged on machinery
On 30th June 2019
Depreciation {(4000-200)/10+(10000-500)/10} $1330
Accumulated depreciation $1330

3ACCOUNTING-2007
Accumulated Depreciation $380
Machine A $380
(Depreciation charged on machinery)
Accumulated Depreciation $900
Machine B $900
Depreciation charged on machinery
Book Value of Machinery A as on 30th June 2019 = ($4000-$190-$380) = $3430
Book Value of Machinery B as on 30th June 2019 = ($10000-$475-$950) = $8575
After revaluation the book value of Machinery A = $3200
After revaluation the book value of Machinery B = $9000
Useful Life of Machine A is 8 years and residual value is $150,
Similarly, Useful Life of Machine B is 8 years and residual value is $400.
On 30th June, 2019
Loss on Revaluation (OCI) $230
Machine A $230
Revaluation downward
Machine B $425
Gain on Revaluation (OCI) $425
Revaluation upwards
On 2nd January 2020

4ACCOUNTING-2007
Extensive repair expense done on machine will be capitalized and added to the cost of
the machine. Hence, the new cost of Machine B is $(9000+6600) and the useful life of the
machine increased to 11.5 years more from 1st July 2019.
On 31st March, 2020
Value of Machine A on 31st March 2020 $3200
Less: Depreciation (${(3200-150)/8}*9/12) $286
Value of Machine as on 31st March 2020 after depreciation $2914
Trade in allowed for Machine A $2800
Loss to be recorded in P&L $114
On 31st March, 2020
Machine C $6400
Cash $3600
Machine A $2800
Balance cash paid to purchase Machine C
The installation and transportation cost will be added to the cost of the asset. Hence the actual
cost of the Machine C is $(6400+95) = $6495
On 30th June, 2020
Profit and Loss A/c $114
Loss on trade of machine $114
Loss on trading machine A with Machine C
Depreciation on Machine B [${(9000-400)/8)*185/365}
+ ${(15600-945)/11.5)*180/365]
$1182

5ACCOUNTING-2007
Accumulated Depreciation $1182
Depreciation charged
Accumulated Depreciation $1182
Machine B $1182
Depreciation charged to machine
Depreciation on Machine C ${[(6495-800)/8}*3/12] $178
Accumulated depreciation $178
Depreciation charged
Accumulated depreciation $178
Machine C $178
Depreciation charged to machine
Fair value as on 30th June
Machine B = $14000 Machine C = $6500
Carrying Value = $14418 Carrying Value = $6317
Decrement = $418 Increment = $183
Loss on revaluation of machine B $418
Machine C $418
Writing down to carrying amount

6ACCOUNTING-2007
Machine C $183
Gain on revaluation of machine B $183
Writing down to carrying amount
Question 2
Part A
Fair Value of the Land = $12000
Loss of Revaluation (OCI) = $(51200-12000) = $39200
Loss on revaluation $39200
Land $39200
Bringing land to the fair value
Goodwill impaired completely before impairing other assets
Impairment Loss $6400
Goodwill $6400
Goodwill eliminated from asset
Impairment of Other Asset
Impairment Value of Non-Current Asset $145600
Impairment loss $442400
Non-Current Asset $588000
Non-Current Asset Impaired

7ACCOUNTING-2007
Considering the impaired value of Land is $12000, hence value of other non-current asset is
shown below:
Non-Current Asset Value ($) Proportion Value after
impairment
Building 262400 0.455555556 60862
Plant & Equipment 281600 0.488888889 65316
Trade marks 32000 0.055555556 7422
Total 576000 1 133600
Building 60862
Land 12000
Plant & Machinery 65316
Trade Mark 7422
Impairment Loss $442400
Non-Current Asset $588000
Asset written down to their carrying amount
Part B
The value of Plant and Machinery is $281600 after accumulated depreciation.
If the value after impairment comes to $256000, then the company should record impairment
loss of $(281600-256000) = $25600.
The fair value less cost of disposal or sale value of the plant and machinery is $240000, then
the company should record for the loss $16000 as loss on revaluation. However, since no
transaction or sale has taken place, as it was only determined hence no adjustment is required
journal entries prepared above.