Dolphin Ltd applies the revaluation model to its equipment. On 30 June 2023 Dolphin Ltd is preparing end of year adjusting entries (has not yet recorded depreciation) and obtains a fair value for equipment A on this date as $70,000.

Previous information related to the equipment A is as follows:

The equipment was purchased for $100,000 on 1 July 2019. On this date the equipment was estimated to have a residual value of $5,000 and a useful life of 10 years.

Dolphin Ltd adopted the revaluation model for year end 30 June 2022 which resulted in an increase in equipment As value to reflect the fair value of $85,000. After this revaluation, useful life and residual value remained unchanged from the original estimate.

Dolphin Ltd uses the straight-line method to depreciate equipment and records depreciation to the nearest month. The income tax rate is 30%. All calculations are rounded to the nearest dollar.

Required:

a) Calculate the gain on revaluation that would have been recognised for equipment A on 30 June 2022. (Do not prepare journal entries) (5 marks)

b) Calculate the gain or loss on revaluation for equipment A on 30 June 2023. (6 marks)

c) Prepare the necessary journal entries to record depreciation and to revalue equipment A on 30 June 2023. (9 marks)

Note: Marks are awarded for showing all your calculations, as well as the journal entries.