Question
Entity A leases construction machinery to local building sub-contractors for many years. On 1 January 2014 , Entity A purchased 20 30 units of construction
Entity A leases construction machinery to local building sub-contractors for many years.
On 1 January 2014, Entity A purchased 20 30 units of construction road roller. The economic life of the road roller is 5 years. The invoice price was $1,850,000 per unit. They were all delivered to Entity A on 1 April 2014. Installation expense of $150,000 was incurred for installing 30 units of road roller on 1 April 2014. The invoice price and the installation expense were settled on 5 May 2014 and 1 April 2014respectively. The depreciation policy for the construction road roller is based on the straight-line method with a residual value of $2,500 each.
On 31 March 2016, the construction market has suddenly turned down due to several new government legislation on the construction industry. Therefore, Entity A estimated that each construction road roller would be able to generate $450,000 cash per annum in the remaining years and the scrap value of these 30 units of construction road roller was totally $30,000. The discounting rate was applied as 15.00% per annum. Entity A also estimated that if they were sold to the second-hand market, the value of each construction road roller was $990,000. A disposal cost of $120,000 would be incurred for selling them.
On 31 March 2017, Entity A confirmed that further impairment adjustments were not needed after the impairment review.
On 31 March 2018, the construction market dramatically turned up due to the recent economic boom. Entity A estimated the value in use of a road roller would be $375,000. However, these road rollers could not be sold at that time due to a lack of a buyer.
On 31 March 2019, the scrap value of the road roller was sold as $2,250 each.
The end of the reporting period is 31 March.
REQUIRED:
According to relevant accounting standards, provide all necessary journal entries of Entity A from 1 January 2014 to 31 March 2019.
ACCOUNTS FOR INPUT:
| Road roller | Plant | Machine | Motor van | Land | Building | Inventory | Intangible assets | Bank |
| Payable | Receivable | Retained earnings | Other income | Other expense | Interest expense | Interest revenue |
| Depreciation | Accum. depreciation | Impairment loss | Reversal of impairment loss | Loss on disposal | Gain on disposal |
| Restoration liability | Goodwill | Revaluation surplus | Revaluation deficit | No entry |
Can ignore the number entries > Credit (5) Hints For Sequence ANSWERS: Journal Entries: Date Account Name 1-Jan-14 Road roller Payable 1-Apr-14 Other expense Debit (5) 55500000 55500000 150000 Judge Dr/Cr Side. Only Input Amount Bank 150000 An Asset 5-May-14 Payable 55500000 Judge DrCr Side. Only Input Amount. Bank 55500000 31-Mar-15 31-Mar-16 31-Mar-16 31-Mar-17 31-Mar-18 31-Mar-18 31-Mar-19 31-Mar-19 Not an Asset Judge Dr Side. Only Input Amount Judge Dr/Cr Side. Only Input Amount
Entity A leases construction machinery to local building sub-contractors for many years.
On 1 January 2014, Entity A purchased 20 30 units of construction road roller. The economic life of the road roller is 5 years. The invoice price was $1,850,000 per unit. They were all delivered to Entity A on 1 April 2014. Installation expense of $150,000 was incurred for installing 30 units of road roller on 1 April 2014. The invoice price and the installation expense were settled on 5 May 2014 and 1 April 2014respectively. The depreciation policy for the construction road roller is based on the straight-line method with a residual value of $2,500 each.
On 31 March 2016, the construction market has suddenly turned down due to several new government legislation on the construction industry. Therefore, Entity A estimated that each construction road roller would be able to generate $450,000 cash per annum in the remaining years and the scrap value of these 30 units of construction road roller was totally $30,000. The discounting rate was applied as 15.00% per annum. Entity A also estimated that if they were sold to the second-hand market, the value of each construction road roller was $990,000. A disposal cost of $120,000 would be incurred for selling them.
On 31 March 2017, Entity A confirmed that further impairment adjustments were not needed after the impairment review.
On 31 March 2018, the construction market dramatically turned up due to the recent economic boom. Entity A estimated the value in use of a road roller would be $375,000. However, these road rollers could not be sold at that time due to a lack of a buyer.
On 31 March 2019, the scrap value of the road roller was sold as $2,250 each.
The end of the reporting period is 31 March.
REQUIRED:
According to relevant accounting standards, provide all necessary journal entries of Entity A from 1 January 2014 to 31 March 2019.
ACCOUNTS FOR INPUT:
| Road roller | Plant | Machine | Motor van | Land | Building | Inventory | Intangible assets | Bank |
| Payable | Receivable | Retained earnings | Other income | Other expense | Interest expense | Interest revenue |
| Depreciation | Accum. depreciation | Impairment loss | Reversal of impairment loss | Loss on disposal | Gain on disposal |
| Restoration liability | Goodwill | Revaluation surplus | Revaluation deficit | No entry |
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
18th Edition
1119790972, 9781119790976
