Kennards Ltd commenced operations on 1 July 2012 as a long-term self-storage facility for personal household belongings. The owner contributed Buildings of $2,000,000.

At the end of the financial year on 30 June 2020, the following items have yet to be included:

1. Equipment was purchased on 1 July 2018 at a cost of $560,000. The equipment had a useful life of 6 years and a $100,000 residual value. Kennards Ltd uses the reducing balance method of depreciation at 25% per annum.

Required

Prepare the journal entry to record the necessary adjustment on 30 June 2020. Explain the entry

2. Kennards Ltd depreciates its buildings at on a straight-line basis. At purchase the buildings had an estimated life of 20 years.

Required

Prepare the journal entry to record the necessary adjustment on 30 June 2020. Explain the entry

3. Kennards Ltd has received a professional valuation of its buildings with a fair value at 30 June 2020 of $1,800,000.

Required

Explain why depreciation of non-current assets must still be recorded independently of valuation adjustments.