Question
1. Buch Corporation purchased Machine Z at the beginning of year 1 at a cost of $100,000. The machine is used in the production of
1. Buch Corporation purchased Machine Z at the beginning of year 1 at a cost of $100,000. The machine is used in the production of product X. expected useful life of the machine is 10 years with no residual value. The straight-line method of depreciation is used. At the end of 2nd year. The machine is revalued upward at its fair value of $90,000.
A, Calculate the revaluation gain on 31 Dec, Year 2 and prepare appropriate journal entries.
B, At the end of year 4th, fair value of the machine is $60,000, calculate revaluation gain or loss and prepare appropriate journal
In year 3, due to adverse economic conditions demand for product X decline significantly. At Dec 31, year 3, the company develops the following estimates related to machine Z:
Expected future cash flows: 75,000
Present value of expected future cash flows: 68,000
Selling price: 73,000
Costs of disposal: 3,000
Required:
C, Determine whether the machine has been impaired in accordance with IAS 36 and prepare appropriate journal entries on 31 Dec, Year 3.
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