Question 4 [16 marks]

Revaluation of property, plant and equipment

You are the accountant for Superstar Ltd, and you are required to account for the companys equipment for the years ended 30 June 2017 and 30 June 2018, which are measured using the revaluation model. The directors elect to depreciate equipment on a straight-line basis.

Equipment 1:

The first equipment has a carrying amount as follows, prior to any depreciation or revaluation being recognised for the year ended 30 June 2017:

Revalued amount (as at 30 June 2016):	$60,000
Less: accumulated depreciation	-
Carrying amount	$60,000

$60,000

This equipment was revalued for the first time on 30 June 2016, from $70,000 to $60,000. The directors determined that as at 30 June 2016, this equipment had an estimated remaining useful life of 4 years, and an estimated residual value of $10,000.

The directors have determined that the fair value of this equipment on 30 June 2017 is $55,000. At 30 June 2017, this equipment had an estimated remaining useful life of 3 years, and the residual value remains unchanged at $10,000.

The directors have determined that the fair value of this equipment on 30 June 2018 is $44,000.

Equipment 2:

The second equipment at has a carrying amount as follows, prior to any depreciation or revaluation being recognised for the year ended 30 June 2017:

Revalued amount (as at 30 June 2016):	$20,000
Less: accumulated depreciation	-
Carrying amount	$20,000

$20,000

This equipment has been revalued a number of times, with revaluation decrements amounting to $1,000 being previously recognised in profit or loss. The directors determined that as at 30 June 2016, this equipment had an estimated remaining useful life of 4 years, and an estimated residual value of $4,000.

The directors have determined that the fair value of this equipment on 30 June 2017 is $18,000. At 30 June 2017, this equipment had an estimated remaining useful life of 3 years, and the residual value has been revised to $6,000.

This equipment is sold on 31 December 2017 for $13,000.

Required:

Prepare the necessary journal entries to account for each of the above equipment for the years ended 30 June 2017 and 30 June 2018 (including entries for depreciation, revaluations, and any disposals). Show all relevant workings. Note: you are not required to account for income tax associated with revaluations.