PART B

Rupert Cooper operates a flying school out of Moorabbin Airport that provides flight training lessons to student pilots in Victoria. The following transactions relate to a Cessna airplane that was purchased by the business on 1 July 2014. The business is registered for GST and the GST rate is 10%.

1 July 2014

On 1 July 2014, a new Cessna airplane was purchased for $180,000 (plus GST). The Cessna airplane is depreciated using the straight-line depreciation method and the Cessna airplane has an estimated useful life of 12 years with a residual value of $30,000.

1 July 2019

On 1 July 2019, due to the government increasing the import duty on airplanes, the value of Cessna airplanes has increased. At the same time, Rupert Cooper decided to change accounting for the Cessna airplane from the cost model to the revaluation model. Consequently, the estimated fair value of the Cessna airplane is now $17,500 higher than its current carrying amount as at 1 July 2019. The depreciation method and the expected useful life of the Cessna airplane have not changed. However, it was decided that the residual value of the Cessna airplane at the end of its useful life will be $44,000.

REQUIRED:

(e) Prepare the necessary journal entries to revalue the Cessna airplane as at 1 July 2019.

(f) Prepare the journal entry to record the depreciation of the Cessna airplane for the year

ended 30 June 2020.