ACC204 Advanced Financial Accounting: Depreciation, Revaluation,IFRS3

This assignment solution for ACC204 Advanced Financial Accounting covers several key areas. It includes the calculation of depreciation expense and gain on disposal of machinery using the sum-of-the-years digits method, along with the relevant journal entries. The solution also addresses the revaluation of an asset, including the calculation of the revaluation reserve and the corresponding journal entries. Furthermore, it determines whether goodwill has been acquired in a business combination, calculates the amount of goodwill according to IFRS 3, and discusses the subsequent revaluation of goodwill. Finally, the assignment solution calculates the present value of minimum lease payments and demonstrates the calculation of implicit interest rate in lease accounting. Desklib offers more past papers and solved assignments for students.

Answer 1.
Depreciation expense = Remaining useful life of the asset /Sum of the years digits *Depreciable
cost
Year
Net book value at the
beginning of year
Annual
Depreciation
expense
Net book value at the
end of year
2011 420000 120000 300000
2012 300000 100000 200000
2013 200000 80000 120000
2014 120000 60000 60000
2015 60000 40000 20000
2016 20000 20000 0
Value of machine on 30th June,14 $120,000
Sold machine on 30th June 14 $150000
Gain on sale of machine asset $30000
General Entries at the end of accounting year
S.No Date Account Name Debit Credit
1. 30-Jun-12 Depreciation Expense $100000
Accumulated Depreciation $100000
( Being depreciation charged for the
year)
2. 30-Jun-13 Depreciation Expense $80000
Accumulated Depreciation $80000
( Being depreciation charged for the
year)
3. 30-Jun-14 Depreciation Expense $60000
Accumulated Depreciation $60000
( Being depreciation charged for the
year)
4. 30-Jun-14 Cash $150,000
Gain on asset $30,000

Machine asset $120,000
(being gain occurred on sale machine
asset)
Answer 2. Journal entry required to reflect the revaluation of the asset
The carrying amount asset as on 1 July 2015 = Cost - accumulated depreciation = $100000 -
$20000
Revalued $120000
i) Calculation of revaluation reserve
Cost of asset = $ 100000
Accumulated Depreciation= $ 20000
Net value of asset as on 1st July, 15 = $80000
ii) New value of asset ( after revaluation) = $120000
Revaluation reserve= ii-i
= $120000-$80000
= $40000
Journal entries
Date Journal entries Debit Credit
1 July 2015 Fixed Asset $40,000
Revaluation reserve $40,000
30 June 2016 Depreciation Expense $15000
Accumulated Depreciation $15000
( Being depreciation charged for the
year)
Answer 3.
a) Yes, goodwill has been acquired by Tamarama Ltd. Calculation of goodwill is as below:
i) Fair value of assets transferred:-
Cash = $70000

Fair value of land= $300000
Fair value of Plant and machinery = $250000
Total fair value of asset transferred= $70000+$300000+$250000
=$620000
ii) Amount of any non-controlling interest = Nil
iii) Fair value of equity interest = Nil
iv) Fair value of net asset (Bronte ltd.)
Asset - $700000
Liabilities- $300000
Net assets= $400000
Goodwill = $620000+0+0-$400000
= $180000
b) As per IFRS 3, subsequent upward revaluation of goodwill is not allowed by takeover
company.
Answer 4.
a) Present value of minimum lease
PV = SUM[P/(1+r)n] + [RV/(1+r)n]
Where PV = Present Value
P = Annual Lease Payments
$10000
0
r = Interest rate 6%
n = number of years in the lease term 8
RV = residual value $80000
SUM[P/(1+r)n] = the total amount paid over the lease term, discounted for the
interest rate.
Cash 1+r Period (1+r)n
Net present
value
$100000 1.06 1 1.06 $94339.62
$100000 1.06 2 1.1236 $88999.64
$100000 1.06 3 1.191016 $83961.92
$100000 1.06 4 1.262477 $79209.36
$100000 1.06 5 1.338226 $74725.81
$100000 1.06 6 1.418519 $70496.05

$100000 1.06 7 1.50363 $66505.71
$100000 1.06 8 1.593848 $62741.23
$80000 1.06 8 1.593848 $50192.98
Sum $671172.37
Total present value = $671172.38
b)
Formula for calculating implicit rate= (Interest ÷ Principal) x 100
Year
Lease
liability (A) Lease payment
Interest
(B=A*6%)
Decrease in lease
liability
(C=100000-B)
Lease liability
(c/f)
2015 $671172 100000 $40270 $59730 $611442
2016 $611442 100000 $36687 $63313 $548129
2017 $548129 100000 $32888 $67112 $481017
2018 $481017 100000 $28861 $71139 $409878
2019 $409878 100000 $24593 $75407 $334470
2020 $334470 100000 $20068 $79932 $254538
2021 $254538 100000 $15272 $84728 $169811
2022 $169811 100000 $10189 $89811 $80000
While calculating the residual value, 6% implicit interest rate has been taken to calculate the
value.