Question 1 Topic: Property, Plant and Equipment

PART A (8 marks)

On 1 July 2017, ABC Ltd purchased and recorded equipment at its cost of acquisition of $4,800,000. ABC Ltd depreciates the asset over its estimated useful life of eight years using the straight-line method. Disposal value at the end of the eighth year is zero. ABC Ltd uses the revaluation model to account for equipment and records accumulated depreciation using the net method. On 30 June 2018 the fair value of the equipment was the same as its carrying amount. On 30 June 2019 the fair value of the equipment was $4,680,000. There was no change in the estimated useful life or the disposal value of the equipment. There were no indicators of impairment evidenced in the years ended 30 June 2018 and 30 June 2019.

REQUIRED:

1. Calculate the carrying amount, showing its component parts, of the equipment on 30 June 2019 immediately before the revaluation.
2. Prepare journal entries, including narrations, to account for the revaluation of the equipment on 30 June 2019 consistent with AASB 116 Property, Plant and Equipment.
3. Calculate the depreciation expense in respect of the equipment to be recorded in the year ending 30 June 2020.