Question
6.Alibaba is a leading on-line retailer. It has various non-current assets, including Buildings and Equipment. The Buildings purchased on 1 July 2012, have an anticipated
6.Alibaba is a leading on-line retailer. It has various non-current assets, including Buildings and Equipment. The Buildings purchased on 1 July 2012, have an anticipated residual value of $1,600,000 and an expected useful life of 20 years. Alibaba uses the fair value model for Buildings (AASB 116).
The Equipment purchased on 1 July 2016, has an anticipated residual value of $320,000 and an expected useful life of 15 years. Alibaba uses the cost model for Equipment (AASB 136).
Both assets are being depreciated using the straight-line method.
An extract of the Balance Sheet at 30 June 2019 after the annual depreciation is provided below:
Non-current Assets
Buildings 3,000,000
Less Accumulated Depreciation (490,000)
2,510,000
Equipment 920,000
Less Accumulated Depreciation (120,000)
800,000
Information relating to the Equipment at 30 June 2019 is:
Equipment Value in Use $788,000
Equipment Fair Value $792,000
Costs to sell Equipment $8,000
Information relating to the Buildings is:
The remaining useful life of the Buildings at 1 July 2019 is 13 years.
question:
a) Prepare the general journal entries at 30 June 2019 for the Equipment, taking into account the information provided. Justify your answer and show all workings.
b) Briefly explain why the fair value model is appropriate for the Buildings of Alibaba
c) Prepare the general journal entries at 30 June 2019 for the Buildings, taking into account the information provided. Justify your answer and show all workings.
d) Prepare all the general journal entries for the year ended 30 June 2020 for the Buildings. Justify your answer and show all workings.
at 30 June 2019 at 30 June 2020 Building fair value Building value in use Costs to sell buildings $2,848,000 $2,852,000 $40,000 $2,028,000 $2,036,000 $40,000
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