SENS Ltd. acquired equipment on January 1, Year 1, for $500,000. The equipment was depreciated on a straight-line basis over an estimated useful life of 10 years. On January 1, Year 3, SENS sold this equipment to MEL Corp., its parent company, for $420,000. MEL is depreciating this equipment on a straight-line basis over an estimated useful life of 8 years.
MEL and SENS revalue their property, plant, and equipment to fair value each year under IAS 16 and transfer the revaluation surplus to retained earnings over the useful life of the asset or upon sale of the asset. The fair value of this equipment was $460,000 at the end of Year 1, $416,000 at the end of Year 2, and $370,000 at the end of Year 3. When the equipment is remeasured to fair value, both the originalcost and accumulated depreciation are grossed up for the increase in value.
Required:
Assume that this is the only equipment owned by the two companies and ignore income tax. Compute the balances that would appear in MEL's separate-entity statements, SENS's separate-entity statements, and MEL's consolidated statements for Years 1, 2, and 3 for each of the following:
(a) Equipment
(b) Accumulated depreciation
(c) Accumulated other comprehensive income-revaluation surplus (d) Gain on sale of equipment (e) Depreciation expense