Rockwell Ltd has a policy of revaluing its motor vehicles to fair value. The details at 30 June 2023 relating to Rockwell Ltd's motor vehicles, which had previously been revalued upwards by $28,000, are as follows. Motor vehicles Less: Accumulated depreciation $ 352 000 88 000 $ 264 000
Rockwell Ltd has a policy of revaluing its motor vehicles to fair value. The details at 30 June 2023 relating to Rockwell Ltd's motor vehicles, which had previously been revalued upwards by $28,000, are as follows. Motor vehicles Less: Accumulated depreciation $ 352 000 88 000 $ 264 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Rockwell Ltd has a policy of revaluing its motor vehicles to fair value. The details at 30 June
2023 relating to Rockwell Ltd's motor vehicles, which had previously been revalued upwards
by $28,000, are as follows.
Motor vehicles
Less: Accumulated depreciation
$ 352 000
88 000
$ 264 000
At the date of the revaluation increase (1 July 2022) the vehicles had a zero residual value and
a useful life of 4 years. Depreciation has been calculated using the straight-line method. On 31
December 2023, Rockwell Ltd was informed that the fair value of the vehicles was $200 000.
The useful life and residual value have not changed. At 30 June 2024, the carrying amounts
are not materially different from fair values.
Required
(a) Prepare the necessary general journal entries at 31 December 2023.
(b) Calculate depreciation expense at 30 June 2024.
(c) How would the motor vehicle be shown in financial statements at 30 June 2024?
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