Vertonghen Ltd has various non-current assets, including Buildings and Machinery. The Buildings were purchased on 1 July 2009, have an anticipated residual value of $400,000 and an expected useful life of 20 years. The Buildings are being recorded under the revaluation model (AASB 116). The machinery was purchased on 1 July 2013. It has an anticipated residual value of $80,000 and an expected useful ife of 15 years. The machinery is being recorded under the cost model (AASB 136). Both assets are being depreciated using the straight-line method. An extract of the balance sheet at 1 July 2015 is provided below: Non-current Assets Buildings Less Accumulated Depreciation 750,000 (105,000) 645,000 Machinery Less Accumulated Depreciation 230,000 (20,000) Information relating to the assets at 30 June 2016 is: Machinery Value in Use Machinery Fair Value Costs to sell Machinery Buildings fair value Buildings Value in Use Costs to sell Buildings $197,000 $198,000 $2,000 $712,000 S713,000 $1,00 Information relating to the asset at 30 June 2017 is: Buildings fair value Buildings Value in Use Costs to sell Buildings $507,000 $509,000 $1,000 Required: Prepare the general journal entries for the ycar ended 30 June 2016 for both assets, taking into account the information provided above. Justify your answer and show all workings a) b) Prepare the general journal entries for the year ended 30 June 2017 for the Buildings. Justify your answer and show all workings.
Vertonghen Ltd has various non-current assets, including Buildings and Machinery. The Buildings were purchased on 1 July 2009, have an anticipated residual value of $400,000 and an expected useful life of 20 years. The Buildings are being recorded under the revaluation model (AASB 116). The machinery was purchased on 1 July 2013. It has an anticipated residual value of $80,000 and an expected useful ife of 15 years. The machinery is being recorded under the cost model (AASB 136). Both assets are being depreciated using the straight-line method. An extract of the balance sheet at 1 July 2015 is provided below: Non-current Assets Buildings Less Accumulated Depreciation 750,000 (105,000) 645,000 Machinery Less Accumulated Depreciation 230,000 (20,000) Information relating to the assets at 30 June 2016 is: Machinery Value in Use Machinery Fair Value Costs to sell Machinery Buildings fair value Buildings Value in Use Costs to sell Buildings $197,000 $198,000 $2,000 $712,000 S713,000 $1,00 Information relating to the asset at 30 June 2017 is: Buildings fair value Buildings Value in Use Costs to sell Buildings $507,000 $509,000 $1,000 Required: Prepare the general journal entries for the ycar ended 30 June 2016 for both assets, taking into account the information provided above. Justify your answer and show all workings a) b) Prepare the general journal entries for the year ended 30 June 2017 for the Buildings. Justify your answer and show all workings.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:Vertonghen Ltd has various non-current assets, including Buildings and Machinery. The
Buildings were purchased on 1 July 2009, have an anticipated residual value of $400,000 and an
expected useful life of 20 years. The Buildings are being recorded under the revaluation
model (AASB 116).
The machinery was purchased on 1 July 2013. It has an anticipated residual value of $80,000 and
an expected useful life of 15 years. The machinery is being recorded under the cost model
(AASB 136).
Both assets are being depreciated using the straight-line method.
An extract of the balance sheet at 1 July 2015 is provided below:
Non-current Assets
Buildings
Less Accumulated Depreciation
750,000
(105,000)
645,000
Machinery
Less Accumulated Depreciation
230,000
(20,000)
Information relating to the assets at 30 June 2016 is:
Machinery Value in Use
Machinery Fair Value
Costs to sell Machinery
Buildings fair value
Buildings Value in Use
Costs to sell Buildings
$197,000
S198,000
$2,000
S712,000
S713,000
$1,000
Information relating to the asset at 30 June 2017 is:
Buildings fair value
Buildings Value in Use
Costs to sell Buildings
$507,000
S509,000
$1,000
Required:
Prepare the general journal entries for the year ended 30 June 2016 for both assets, taking
into account the information provided above. Justify your answer and show all workings
a)
b)
Prepare the general journal entries for the year ended 30 June 2017 for the Buildings.
Justify your answer and show all workings.
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