Chan Group uses revaluation accounting for a class of equipment it uses in its Tennisclub business. Chan purchased the equipment on January 1, 2019, for $600,000; ithas a 10-year useful life with no residual value. Chan Group has the followinginformation related to the equipment. (Assume that Chan uses Straight-line methodfor depreciation and the estimated useful life and residual value does not changeduring the periods presented below.)DateFair ValueJanuary 1, 2019$600,000December 31, 2019567,000December 31, 2020440,000December 31, 2021460,0005. Prepare the entry to record the Depreciation of equipment & AOCIadjustment, if any, on 12-31-20206. Prepare the entry to record the Revaluation of equipment on 12-31-20207. Determine the amounts to be reported by Chan Group at December 31,2020. ( Insert a bracket for the expenses, losses or negative balance)WORKINGS12/31/2020BALANCE +/(-)Equipment(Impairment Loss) /Recovery of ImpairmentLossOther ComprehensiveIncome - UnrealizedGain/(Loss) onrevaluation - equipment(OC)Accumulated OtherComprehensive Income

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Description: Chan Group uses revaluation accounting for a class of equipment it uses in its Tennisclub business. Chan purchased the equipment on January 1, 2019, for $600,000; ithas a 10-year useful life with no residual value. Chan Group has the followinginform

Particulars Amount Cost of Equipment purchased on Jan 1, 2019 6,00,000 Useful life…

Business

Accounting

5. Prepare the entry to record the Depreciation of equipment & AOCI adjustment, if any, on 12-31-2020 6. Prepare the entry to record the Revaluation of equipment on 12-31-2020 7. Determine the amounts to be reported by Chan Group at December 31, 2020. ( Insert a bracket for the expenses, losses or negative balance)

5. Prepare the entry to record the Depreciation of equipment & AOCI adjustment, if any, on 12-31-2020 6. Prepare the entry to record the Revaluation of equipment on 12-31-2020 7. Determine the amounts to be reported by Chan Group at December 31, 2020. ( Insert a bracket for the expenses, losses or negative balance)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

Chan Group uses revaluation accounting for a class of equipment it uses in its Tennis
club business. Chan purchased the equipment on January 1, 2019, for $600,000; it
has a 10-year useful life with no residual value. Chan Group has the following
information related to the equipment. (Assume that Chan uses Straight-line method
for depreciation and the estimated useful life and residual value does not change
during the periods presented below.)
Date
Fair Value
January 1, 2019
$600,000
December 31, 2019
567,000
December 31, 2020
440,000
December 31, 2021
460,000
5. Prepare the entry to record the Depreciation of equipment & AOCI
adjustment, if any, on 12-31-2020
6. Prepare the entry to record the Revaluation of equipment on 12-31-2020
7. Determine the amounts to be reported by Chan Group at December 31,
2020. ( Insert a bracket for the expenses, losses or negative balance)
WORKINGS
12/31/2020
BALANCE +/(-)
Equipment
(Impairment Loss) /
Recovery of Impairment
Loss
Other Comprehensive
Income - Unrealized
Gain/(Loss) on
revaluation - equipment
(OC)
Accumulated Other
Comprehensive Income

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Journal entry to record Depreciation of equipment and AOCI adjustment

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