90.2K

Verified Solution

Link Copied!

Question 2: Non-Current Asset revaluation (19 Marks) In the 30 June 2020 annual report of Herbal Ltd, the equipment was reported as follows: Equipment (at cost) $500,000 Accumulated depreciation 150,000 350,000 The equipment consisted of two machines, Machine A and Machine B. Machine A had cost $300,000 and had a carrying amount of $180,000 at 30 June 2020, and Machine B had cost $200,000 and was carried at $170,000. Both machines are measured using the cost model, and depreciated on a straight-line basis over a 10-year period. On 31 December 2020, the directors of Herbal Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to $180,000 with an expected useful life of 6 years, and Machine B was revalued to $155,000 with an expected useful life of 5 years. At 30 June 2021, Machine A was assessed to have a fair value of $163,000 with an expected useful life of 5 years, and Machine B's fair value was $136,500 with an expected useful life of 4 years. Required: Prepare the journal entries in the records of Herbal Ltd to record the described events over the period 31 December 2020 to 30 June 2021 including closing entries of other comprehensive income to Asset Revaluation Surplus account you do not need to show closing entries to P+L summary). Assume the end of the reporting period is 30 June each year. Ignore tax effect. Note: Show all your workings. Journal narrations are required

Answer & Explanation Solved by verified expert

See Answer