End of Chapter Exercise 5.22 Wren Trading operates in a very competitive field. To maintain its market position, it purchased two new machines for cash on 1 January 2015. It had previously rented its machines. Machine A cost $37,000 and Machine B cost $92,000. Each machine was expected to have a useful life of 10 years, and residual values were estimated at $1,800 for Machine A and $4,600 for Machine B. On 30 June 2016, Wren Trading adopted the revaluation model to account for the class of machinery. The fair values of Machine A and Machine B were determined to be $29,000 and $83,000 respectively on that date. The useful life and residual value of Machine A were reassessed to 8 years and $1,400. The useful life and residual value of Machine B were reassessed to 8 years and $3,700. On 2 January 2017, extensive repairs were carried out on Machine B for $61,000 cash. Wren Trading expected these repairs to extend Machine B's useful life by 3.5 years, and it revised Machine B's estimated residual value to $8,700. Owing to technological advances, Wren Trading decided to replace Machine A. It traded in Machine A on 31 March 2017 for new Machine C, which cost $59,000. A $26,000 trade-in was allowed for Machine A, and the balance of Machine C's cost was paid in cash. Transport and installation costs of $850 were incurred in respect to Machine C. Machine C was expected to have a useful life of 8 years and a residual value of $7,400. Wren Trading uses the straight-line depreciation method, recording depreciation to the nearest month and the nearest dollar. The end of its reporting period is 30 June. On 30 June 2017, fair values were determined to be $129,000 and $60,000 for Machines B and C respectively. Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June 2017.(Enter debit entries first followed by credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.)

General journal
Date	Account and explanation	Debit	Credit
2015 01/01	Deferred tax liabilityAsset revaluation surplus machine BAccumulated depreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Income tax expense (OCI)Machine AMachine BCashDepreciation machinery
Accumulated depreciation machineryIncome tax expense (OCI)Machine BCashDeferred tax liabilityAsset revaluation surplus machine BMachine ADepreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)
Income tax expense (OCI)Accumulated depreciation machineryCashDepreciation machineryGain on revaluation of machinery (OCI)Machine BMachine ALoss on revaluation of machinery (P/L)Deferred tax liabilityAsset revaluation surplus machine B
(Purchase of machines)
30/06	Machine BCashDeferred tax liabilityDepreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Income tax expense (OCI)Machine AAccumulated depreciation machineryAsset revaluation surplus machine B
Depreciation machineryMachine BDeferred tax liabilityAsset revaluation surplus machine BAccumulated depreciation machineryCashLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Income tax expense (OCI)Machine A
(Depreciation on machinery)
2016 30/06	Machine BAccumulated depreciation machineryCashMachine ADepreciation machineryGain on revaluation of machinery (OCI)Loss on revaluation of machinery (P/L)Income tax expense (OCI)Deferred tax liabilityAsset revaluation surplus machine B
Loss on revaluation of machinery (P/L)Deferred tax liabilityAsset revaluation surplus machine BGain on revaluation of machinery (OCI)Income tax expense (OCI)Machine AMachine BCashAccumulated depreciation machineryDepreciation machinery
(Depreciation on machinery)
	CashMachine BAsset revaluation surplus machine BDepreciation machineryMachine AIncome tax expense (OCI)Accumulated depreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Deferred tax liability
Machine ADeferred tax liabilityDepreciation machineryAsset revaluation surplus machine BAccumulated depreciation machineryMachine BCashLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Income tax expense (OCI)
(Write down of Machine A to carrying amount)
	Asset revaluation surplus machine BMachine BDepreciation machineryIncome tax expense (OCI)Gain on revaluation of machinery (OCI)Machine ACashAccumulated depreciation machineryLoss on revaluation of machinery (P/L)Deferred tax liability
Deferred tax liabilityAccumulated depreciation machineryMachine BIncome tax expense (OCI)Machine ACashAsset revaluation surplus machine BLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Depreciation machinery
(Downward revaluation of Machine A)
	Machine ADeferred tax liabilityAsset revaluation surplus machine BCashMachine BDepreciation machineryAccumulated depreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)Income tax expense (OCI)
Machine ADepreciation machineryCashDeferred tax liabilityGain on revaluation of machinery (OCI)Income tax expense (OCI)Accumulated depreciation machineryLoss on revaluation of machinery (P/L)Asset revaluation surplus machine BMachine B
(Write down of Machine B to carrying amount)
	Machine BAsset revaluation surplus machine BCashIncome tax expense (OCI)Deferred tax liabilityDepreciation machineryMachine AAccumulated depreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)
Income tax expense (OCI)Accumulated depreciation machineryDeferred tax liabilityAsset revaluation surplus machine BCashMachine AMachine BDepreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)
(Revaluation of Machine B)
	CashGain on revaluation of machinery (OCI)Machine AMachine BAccumulated depreciation machineryDeferred tax liabilityAsset revaluation surplus machine BDepreciation machineryIncome tax expense (OCI)Loss on revaluation of machinery (P/L)
Deferred tax liabilityAsset revaluation surplus machine BIncome tax expense (OCI)Machine AMachine BCashDepreciation machineryAccumulated depreciation machineryLoss on revaluation of machinery (P/L)Gain on revaluation of machinery (OCI)
(Tax effect of revaluation of Machine B)
	Loss on revaluation of machinery (P/L)Machine BIncome tax expense (OCI)Deferred tax liabilityDepreciation machineryAsset revaluation surplus machine BMachine AAccumulated depreciation machineryCashGain on revaluation of machinery (OCI)
Machine AAsset revaluation surplus machine BGain on revaluation of machinery (OCI)Loss on revaluation of machinery (P/L)Machine BDeferred tax liabilityCashIncome tax expense (OCI)Depreciation machineryAccumulated depreciation machinery
Asset revaluation surplus machine BGain on revaluation of machinery (OCI)Loss on revaluation of machinery (P/L)Machine ADepreciation machineryCashMachine BIncome tax expense (OCI)Accumulated depreciation machineryDeferred tax liability
(Accumulation of net revaluation gain in equity)
2017 02/01	Asset revaluation surplus machine BDepreciation machine CMachine BAccumulated depreciation machine BMachine AGain on revaluation of machine C (OCI)CashDepreciation machine BAsset revaluation surplus machine CDeferred tax liabilityDepreciation machine ALoss on sale of machine AAccumulated depreciation machine CAccumulated depreciation machine AMachine CLoss on revaluation of machine B (OCI)Income tax expense (OCI)
Machine CDepreciation machine BMachine ALoss on sale of machine AIncome tax expense (OCI)Asset revaluation surplus machine BGain on revaluation of machine C (OCI)Asset revaluation surplus machine CAccumulated depreciation machine BAccumulated depreciation machine ACashDepreciation machine CMachine BDepreciation machine AAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Deferred tax liability
(Depreciation to date of overhaul)
	Accumulated depreciation machine BDeferred tax liabilityLoss on sale of machine AAccumulated depreciation machine CAsset revaluation surplus machine BMachine BIncome tax expense (OCI)Depreciation machine CCashAsset revaluation surplus machine CDepreciation machine ADepreciation machine BGain on revaluation of machine C (OCI)Loss on revaluation of machine B (OCI)Machine AAccumulated depreciation machine AMachine C
	Depreciation machine CMachine ALoss on revaluation of machine B (OCI)Asset revaluation surplus machine BDepreciation machine BGain on revaluation of machine C (OCI)Loss on sale of machine AAccumulated depreciation machine AAccumulated depreciation machine CIncome tax expense (OCI)Asset revaluation surplus machine CMachine BDeferred tax liabilityAccumulated depreciation machine BCashMachine CDepreciation machine A
(Write down of Machine B to carrying amount)
	Income tax expense (OCI)Machine CDepreciation machine BCashAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Accumulated depreciation machine ADeferred tax liabilityAsset revaluation surplus machine BAsset revaluation surplus machine CMachine AGain on revaluation of machine C (OCI)Accumulated depreciation machine BLoss on sale of machine ADepreciation machine CMachine BDepreciation machine A
	Machine AAsset revaluation surplus machine BMachine CAccumulated depreciation machine AIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Depreciation machine CDepreciation machine ALoss on sale of machine ACashAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Deferred tax liabilityAsset revaluation surplus machine CDepreciation machine BAccumulated depreciation machine BMachine B
(Purchase of machine B)
31/03	Accumulated depreciation machine BMachine ALoss on revaluation of machine B (OCI)Asset revaluation surplus machine BDepreciation machine BGain on revaluation of machine C (OCI)Depreciation machine ADeferred tax liabilityAsset revaluation surplus machine CMachine CMachine BIncome tax expense (OCI)Accumulated depreciation machine ACashLoss on sale of machine ADepreciation machine CAccumulated depreciation machine C
Machine BGain on revaluation of machine C (OCI)Accumulated depreciation machine AMachine AIncome tax expense (OCI)CashDepreciation machine AMachine CDepreciation machine CAsset revaluation surplus machine CLoss on sale of machine ADepreciation machine BDeferred tax liabilityAccumulated depreciation machine BAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Asset revaluation surplus machine B
(Depreciation to date of sale)
	Loss on sale of machine AAsset revaluation surplus machine CDepreciation machine CLoss on revaluation of machine B (OCI)Machine BMachine AAsset revaluation surplus machine BDeferred tax liabilityIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Accumulated depreciation machine CDepreciation machine BMachine CCashAccumulated depreciation machine BDepreciation machine AAccumulated depreciation machine A
Loss on revaluation of machine B (OCI)Accumulated depreciation machine BGain on revaluation of machine C (OCI)Depreciation machine CAsset revaluation surplus machine CDepreciation machine BMachine BCashDepreciation machine AIncome tax expense (OCI)Asset revaluation surplus machine BAccumulated depreciation machine ALoss on sale of machine AMachine AMachine CAccumulated depreciation machine CDeferred tax liability
Machine CAccumulated depreciation machine ADepreciation machine CMachine AAsset revaluation surplus machine BAccumulated depreciation machine CAsset revaluation surplus machine CLoss on sale of machine ALoss on revaluation of machine B (OCI)Deferred tax liabilityIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Depreciation machine BAccumulated depreciation machine BMachine BCashDepreciation machine A
Deferred tax liabilityLoss on revaluation of machine B (OCI)Accumulated depreciation machine CAsset revaluation surplus machine BMachine CAccumulated depreciation machine BCashMachine BIncome tax expense (OCI)Depreciation machine BDepreciation machine AAccumulated depreciation machine AMachine ALoss on sale of machine AGain on revaluation of machine C (OCI)Asset revaluation surplus machine CDepreciation machine C
Asset revaluation surplus machine BGain on revaluation of machine C (OCI)Machine BAsset revaluation surplus machine CDeferred tax liabilityMachine CDepreciation machine BAccumulated depreciation machine BCashLoss on revaluation of machine B (OCI)Accumulated depreciation machine ALoss on sale of machine AIncome tax expense (OCI)Depreciation machine CDepreciation machine AMachine AAccumulated depreciation machine C
(Trade-in of Machine A as part cost of Machine C)
Accumulated depreciation machine BDepreciation machine BCashMachine ADepreciation machine CAccumulated depreciation machine CDeferred tax liabilityGain on revaluation of machine C (OCI)Machine BAsset revaluation surplus machine CLoss on revaluation of machine B (OCI)Income tax expense (OCI)Depreciation machine AAsset revaluation surplus machine BAccumulated depreciation machine AMachine CLoss on sale of machine A
Machine ADeferred tax liabilityAsset revaluation surplus machine CAsset revaluation surplus machine BMachine CAccumulated depreciation machine ADepreciation machine BDepreciation machine CMachine BAccumulated depreciation machine BAccumulated depreciation machine CCashDepreciation machine ALoss on sale of machine ALoss on revaluation of machine B (OCI)Income tax expense (OCI)Gain on revaluation of machine C (OCI)
(Installation costs on Machine C)
Loss on sale of machine AAccumulated depreciation machine AAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Depreciation machine CDepreciation machine ADepreciation machine BAsset revaluation surplus machine CCashMachine AGain on revaluation of machine C (OCI)Deferred tax liabilityMachine CIncome tax expense (OCI)Accumulated depreciation machine BAsset revaluation surplus machine BMachine B
Depreciation machine ADepreciation machine CMachine AIncome tax expense (OCI)Machine BLoss on sale of machine AAccumulated depreciation machine ACashAccumulated depreciation machine CDepreciation machine BAsset revaluation surplus machine CLoss on revaluation of machine B (OCI)Deferred tax liabilityAsset revaluation surplus machine BGain on revaluation of machine C (OCI)Accumulated depreciation machine BMachine C
(Depreciation of Machine B)
Machine BIncome tax expense (OCI)Loss on sale of machine AAsset revaluation surplus machine BMachine CMachine AAsset revaluation surplus machine CDepreciation machine CLoss on revaluation of machine B (OCI)Accumulated depreciation machine ADepreciation machine BAccumulated depreciation machine CGain on revaluation of machine C (OCI)Deferred tax liabilityCashDepreciation machine AAccumulated depreciation machine B
Loss on revaluation of machine B (OCI)Machine BCashIncome tax expense (OCI)Depreciation machine BAsset revaluation surplus machine BDepreciation machine AAccumulated depreciation machine BLoss on sale of machine AAccumulated depreciation machine ADeferred tax liabilityAsset revaluation surplus machine CMachine AGain on revaluation of machine C (OCI)Machine CDepreciation machine CAccumulated depreciation machine C
(Depreciation of Machine C)
Loss on sale of machine ADepreciation machine CAccumulated depreciation machine BMachine CAsset revaluation surplus machine BAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Machine BCashMachine ADepreciation machine AAccumulated depreciation machine ADeferred tax liabilityDepreciation machine BIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Asset revaluation surplus machine C
Asset revaluation surplus machine CDepreciation machine CMachine BLoss on sale of machine AAccumulated depreciation machine CCashAccumulated depreciation machine BAccumulated depreciation machine AMachine ALoss on revaluation of machine B (OCI)Gain on revaluation of machine C (OCI)Depreciation machine AMachine CDeferred tax liabilityIncome tax expense (OCI)Asset revaluation surplus machine BDepreciation machine B
(Writing down to carrying amount)
Loss on sale of machine ADepreciation machine AAccumulated depreciation machine BMachine BCashDeferred tax liabilityIncome tax expense (OCI)Asset revaluation surplus machine BMachine CAccumulated depreciation machine CGain on revaluation of machine C (OCI)Loss on revaluation of machine B (OCI)Depreciation machine BAsset revaluation surplus machine CAccumulated depreciation machine ADepreciation machine CMachine A
Machine BMachine CIncome tax expense (OCI)Loss on revaluation of machine B (OCI)Depreciation machine AAccumulated depreciation machine ADeferred tax liabilityAccumulated depreciation machine BMachine AAsset revaluation surplus machine CCashAsset revaluation surplus machine BGain on revaluation of machine C (OCI)Depreciation machine BLoss on sale of machine ADepreciation machine CAccumulated depreciation machine C
(Downward revaluation of Machine A)
Depreciation machine ADepreciation machine BAccumulated depreciation machine AMachine CMachine AAsset revaluation surplus machine BMachine BLoss on sale of machine ADepreciation machine CAccumulated depreciation machine CAsset revaluation surplus machine CLoss on revaluation of machine B (OCI)Deferred tax liabilityAccumulated depreciation machine BIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Cash
Machine CIncome tax expense (OCI)Asset revaluation surplus machine CLoss on revaluation of machine B (OCI)Deferred tax liabilityAccumulated depreciation machine AAsset revaluation surplus machine BDepreciation machine CGain on revaluation of machine C (OCI)Depreciation machine BDepreciation machine AAccumulated depreciation machine BMachine BMachine ACashLoss on sale of machine AAccumulated depreciation machine C
(Tax effect on devaluation of asset previously revalued upwards)
CashGain on revaluation of machine C (OCI)Loss on sale of machine ADepreciation machine CLoss on revaluation of machine B (OCI)Depreciation machine AMachine AIncome tax expense (OCI)Machine CAsset revaluation surplus machine BAsset revaluation surplus machine CAccumulated depreciation machine ADepreciation machine BAccumulated depreciation machine BDeferred tax liabilityAccumulated depreciation machine CMachine B
Loss on sale of machine AAccumulated depreciation machine CDepreciation machine CAccumulated depreciation machine ALoss on revaluation of machine B (OCI)Machine AAsset revaluation surplus machine CDeferred tax liabilityDepreciation machine BIncome tax expense (OCI)Asset revaluation surplus machine BCashGain on revaluation of machine C (OCI)Depreciation machine AAccumulated depreciation machine BMachine BMachine C
Accumulated depreciation machine ADepreciation machine CAccumulated depreciation machine CLoss on sale of machine ACashLoss on revaluation of machine B (OCI)Machine ADeferred tax liabilityMachine CIncome tax expense (OCI)Asset revaluation surplus machine BGain on revaluation of machine C (OCI)Asset revaluation surplus machine CDepreciation machine BAccumulated depreciation machine BMachine BDepreciation machine A
(Accumulation of net loss to equity)
Machine AIncome tax expense (OCI)Deferred tax liabilityAccumulated depreciation machine CMachine BDepreciation machine BDepreciation machine CAsset revaluation surplus machine CAsset revaluation surplus machine BAccumulated depreciation machine BGain on revaluation of machine C (OCI)Loss on sale of machine ACashLoss on revaluation of machine B (OCI)Depreciation machine AAccumulated depreciation machine AMachine C
Depreciation machine ADeferred tax liabilityIncome tax expense (OCI)Loss on revaluation of machine B (OCI)Asset revaluation surplus machine CAsset revaluation surplus machine BCashMachine CGain on revaluation of machine C (OCI)Depreciation machine BAccumulated depreciation machine AMachine ALoss on sale of machine ADepreciation machine CAccumulated depreciation machine CAccumulated depreciation machine BMachine B
(Writing down to carrying amount)
Accumulated depreciation machine AAsset revaluation surplus machine CDepreciation machine BAccumulated depreciation machine CDepreciation machine CAccumulated depreciation machine BMachine BCashDepreciation machine AGain on revaluation of machine C (OCI)Machine AAsset revaluation surplus machine BMachine CDeferred tax liabilityLoss on sale of machine ALoss on revaluation of machine B (OCI)Income tax expense (OCI)
Accumulated depreciation machine CIncome tax expense (OCI)Gain on revaluation of machine C (OCI)Loss on revaluation of machine B (OCI)Asset revaluation surplus machine CCashAccumulated depreciation machine AMachine AAccumulated depreciation machine BMachine CMachine BAsset revaluation surplus machine BDeferred tax liabilityDepreciation machine BDepreciation machine CDepreciation machine ALoss on sale of machine A
Gain on revaluation of machine C (OCI)CashDepreciation machine AAsset revaluation surplus machine BAccumulated depreciation machine CLoss on sale of machine AAccumulated depreciation machine BDepreciation machine BIncome tax expense (OCI)Asset revaluation surplus machine CDepreciation machine CMachine ADeferred tax liabilityLoss on revaluation of machine B (OCI)Accumulated depreciation machine AMachine BMachine C
Asset revaluation surplus machine CMachine BCashLoss on sale of machine AAccumulated depreciation machine CGain on revaluation of machine C (OCI)Accumulated depreciation machine BDepreciation machine CAccumulated depreciation machine ADepreciation machine BDepreciation machine AMachine ALoss on revaluation of machine B (OCI)Income tax expense (OCI)Machine CDeferred tax liabilityAsset revaluation surplus machine B
(Tax effect of revaluation increment)
Loss on revaluation of machine B (OCI)Depreciation machine BDeferred tax liabilityAsset revaluation surplus machine CIncome tax expense (OCI)Depreciation machine ACashAccumulated depreciation machine BMachine BMachine AAsset revaluation surplus machine BGain on revaluation of machine C (OCI)Accumulated depreciation machine AMachine CLoss on sale of machine AAccumulated depreciation machine CDepreciation machine C
Asset revaluation surplus machine BDeferred tax liabilityIncome tax expense (OCI)CashGain on revaluation of machine C (OCI)Accumulated depreciation machine ALoss on sale of machine AAsset revaluation surplus machine CMachine ADepreciation machine BAccumulated depreciation machine BMachine CMachine BDepreciation machine AAccumulated depreciation machine CLoss on revaluation of machine B (OCI)Depreciation machine C
Asset revaluation surplus machine CDepreciation machine CDepreciation machine BIncome tax expense (OCI)Accumulated depreciation machine CDepreciation machine ALoss on sale of machine AAccumulated depreciation machine BMachine BCashLoss on revaluation of machine B (OCI)Deferred tax liabilityAccumulated depreciation machine AMachine AAsset revaluation surplus machine BMachine CGain on revaluation of machine C (OCI)
(Accumulation of net revaluation gain in equity)

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