Machinery Accumulated depreciation - machinery Building Accumulated depreciation - building DR $ 875,000 2,250,000 CR $ 275,000 750,000 The directors of Emerald Ltd changed the valuation method for machinery from the cost basis to the fair value basis on 30 June 2035 (machinery depreciation expense was recorded for the year ended 30 June 2035 prior to revaluation). Emerald Ltd has always measured its building using the fair value basis. The revaluation surplus account has a balance of $70,000 from previous revaluations. On 30 June 2035, an independent valuer assessed the fair value of the building to be $1,350,000 and the machinery to be $700,000. The income tax rate is 30%. Required: a) Provide the journal entries required to revalue the machinery for the financial year ended 30 June 2035. b) Provide the journal entries required to revalue the building for the financial year ended 30 June 2035. c) Assume that the building and machinery had remaining useful lives of 40 years and 10 years respectively, with zero residual value. Prepare entries to record depreciation expense for the year ended 30 June 2036 using the straight-line method.

Machinery Accumulated depreciation - machinery Building Accumulated depreciation - building DR $ 875,000 2,250,000 CR $ 275,000 750,000 The directors of Emerald Ltd changed the valuation method for machinery from the cost basis to the fair value basis on 30 June 2035 (machinery depreciation expense was recorded for the year ended 30 June 2035 prior to revaluation). Emerald Ltd has always measured its building using the fair value basis. The revaluation surplus account has a balance of $70,000 from previous revaluations. On 30 June 2035, an independent valuer assessed the fair value of the building to be $1,350,000 and the machinery to be $700,000. The income tax rate is 30%. Required: a) Provide the journal entries required to revalue the machinery for the financial year ended 30 June 2035. b) Provide the journal entries required to revalue the building for the financial year ended 30 June 2035. c) Assume that the building and machinery had remaining useful lives of 40 years and 10 years respectively, with zero residual value. Prepare entries to record depreciation expense for the year ended 30 June 2036 using the straight-line method.

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Description: period en bed 31ationMachineryAccumulated depreciation - machineryBuildingAccumulated depreciation - buildingassets:DR$875,0002,250,000CR$275,000750,000The directors of Emerald Ltd changed the valuation method for machinery from the costbasis to the

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.

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Question

period en bed 31
ation
Machinery
Accumulated depreciation - machinery
Building
Accumulated depreciation - building
assets:
DR
$
875,000
2,250,000
CR
$
275,000
750,000
The directors of Emerald Ltd changed the valuation method for machinery from the cost
basis to the fair value basis on 30 June 2035 (machinery depreciation expense was
recorded for the year ended 30 June 2035 prior to revaluation).
Emerald Ltd has always measured its building using the fair value basis. The revaluation
surplus account has a balance of $70,000 from previous revaluations.
On 30 June 2035, an independent valuer assessed the fair value of the building to be
$1,350,000 and the machinery to be $700,000.
The income tax rate is 30%.
Required:
a) Provide the journal entries required to revalue the machinery for the financial year
ended 30 June 2035.
b) Provide the journal entries required to revalue the building for the financial year ended
30 June 2035.
c) Assume that the building and machinery had remaining useful lives of 40 years and 10
years respectively, with zero residual value. Prepare entries to record depreciation
expense for the year ended 30 June 2036 using the straight-line method.

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