Tutorial Week 4 Homework

Chapter 7: Property, plant and equipment

PRACTICE QUESTIONS
QUESTION 7.9
TOOWOOMBA LTD
1 July 2012
Machine A
Machine B
Cash

Dr
Dr
Cr

100 000
60 000

Depreciation expense Machine A

Accumulated depreciation
(1/5 x $100 000)

Dr
Cr

20 000

Depreciation expense Machine B

Accumulated depreciation
(1/3 x $60 000)

Dr
Cr

20 000

Accumulated depreciation- Machine A

Machine A
(Writing down to carrying amount)

Dr
Cr

20 000

Machine A
Dr
Gain on revaluation of Machine A (OCI) Cr
(Revaluation increment: $80 000 to $84 000)

4 000

Income tax expense (OCI)

Deferred tax liability
(Tax effect of revaluation increment)

Dr
Cr

1 200

Gain on revaluation of Machine A (OCI)

Dr
Income tax expense (OCI)
Cr
Asset revaluation surplus Machine A
Cr
(Accumulation of net revaluation gain in equity))

4 000

160 000

30 June 2013

Accumulated depreciation Machine B

Machine B
(Writing down to carrying amount)

Dr
Cr

20 000

20 000

20 000

4 000

1 200

1 200
2 800

20 000
20 000

Tutorial Week 4 Homework

Expense revaluation decrement (P&L)

Machine B
(Revaluation to fair value at 30/6/13)

Dr
Cr

2 000

Machine C
Cash
(Acquisition of machine C)

Dr
Cr

80 000

Depreciation expense Machine B

Accumulated depreciation
(1/2 x /1/2 x $38 000)

Dr
Cr

9 500

Cash

Dr
Cr

29 000

Carrying amount of Machine B Sold

Accumulated depreciation
Machine B
(Carrying amount of machine sold)

Dr
Dr
Cr

28 500
9 500

General reserve
Asset revaluation surplus Machine A
Share Capital

Dr
Dr
Cr

8 000
2 000

Depreciation expense Machine A

Accumulated depreciation
(1/4 x $84 000)

Dr
Cr

21 000

Depreciation expense Machine C

Accumulated depreciation
(1/4 x x $80 000)

Dr
Cr

10 000

Accumulated depreciation Machine A

Machine A
(Writing down to carrying amount)

Dr
Cr

21 000

Loss on revaluation of Machine A (OCI)

Machine A
(Write down of plant from $63000 to $61000)

Dr
Cr

2 000

2 000

1 January 2014

Proceeds on sale of Machine B

(Sale of Machine B)

80 000

9 500

29 000

38 000

10 000

30 June 2014

21 000

10 000

21 000

2 000

Tutorial Week 4 Homework

Deferred tax liability
Income tax expense (OCI)
(Tax-effect on downward revaluation
subsequent to upward revaluation)

Dr
Cr

600

Asset revaluation surplus Machine A

Income tax expense (OCI)
Loss on revaluation of plant (P&L)
Loss on revaluation of plant (OCI)
(Accumulation of revaluation loss to equity)

Dr
Dr
Dr
Cr

800
600
600

Accumulated depreciation Machine C

Machine C
(Writing down to carrying amount)

Dr
Cr

10 000

Loss on revaluation (P&L)

Machine C
(Revaluation to fair value at 30/6/14)

Dr
Cr

1 500

600

2 000

10 000

1 500

Tutorial Week 4 Homework

Chapter 9: Intangible assets

REVIEW QUESTIONS
14. Explain the application of the revaluation model for intangible assets.
Relevant paras are:
75.

After initial recognition, an intangible asset shall be carried at a revalued amount,

being its fair value at the date of the revaluation less any subsequent accumulated
amortisation and any subsequent accumulated impairment losses. For the purpose
of revaluations under this Standard, fair value shall be determined by reference to
an active market. Revaluations shall be made with such regularity that at the
balance sheet date the carrying amount of the asset does not differ materially from
its fair value.

81.

If an intangible asset in a class of revalued intangible assets cannot be revalued

because there is no active market for this asset, the asset shall be carried at its cost
less any accumulated amortisation and impairment losses.

82.

If the fair value of a revalued intangible asset can no longer be determined by

reference to an active market, the carrying amount of the asset shall be its revalued
amount at the date of the last revaluation by reference to the active market less any
subsequent accumulated amortisation and any subsequent accumulated impairment
losses.

85.

If an intangible asset's carrying amount is increased as a result of a revaluation, the

increase shall be credited directly to equity under the heading of revaluation
surplus. However, the increase shall be recognised in profit or loss to the extent
that it reverses a revaluation decrease of the same asset previously recognised in
profit or loss.

86.

If an intangible asset's carrying amount is decreased as a result of a revaluation, the

decrease shall be recognised in profit or loss. However, the decrease shall be
debited directly to equity under the heading of revaluation surplus to the extent of
any credit balance in the revaluation surplus in respect of that asset.

Method is basically the same as that under AASB 116 for PP&E. AASB 138 has a restriction
on use of fair value in that it must be measured by reference to an active market.