QUESTION 1

Anna Ltd owns a machine that originally cost $36 000. It has been depreciated using the straight-line method for 3 years, giving an accumulated depreciation of $15 000 (the salvage value was estimated at $6000 and the useful life at 6 years). At the beginning of the current financial year its carrying value is therefore $21 000. It has been decided by the directors to revalue it to fair value, which is assessed to be $38 000. The salvage value and useful life are considered to be unchanged. Identify whether the machine has revaluation increment or decrement.

REQUIRED

What are the necessary journal entries to record the revaluation in the current financial year? You are required to show all calculation.

(6 marks)