Question 4

On 30 June 2017, the statement of financial position of Peter Ltd showed the following noncurrent asset after charging depreciation:

Machine $ 400 000 Accumulated Depreciation (200 000) 200 000

The company has adopted fair value for the valuation of non-current assets. This has resulted in the recognition in previous periods of an asset revaluation surplus for the machine of $21 000. On 30 June 2017, an independent valuer assessed the fair value of the machine to be $120 000. The income tax rate is 30%.

Required

Prepare any necessary entries to revalue the machine as at 30 June 2017. (10 mks)

30 June 2017 Accumulated depreciation Machine

Machine

Loss on revaluation of Machine (P&L) Loss on revaluation of Machine (OCI)

Machine

Deferred tax liability Income tax expense (OCI)

Asset revaluation surplus - Machine Income tax expense (OCI)

Dr Cr

Dr Dr Cr

Dr Cr

Dr

200 000 200 000

50 000 30 000

80 000

9 000 9 000

21 000 9 000

30 000

Dr Loss on revaluation of Machine (OCI) Cr