Question
Swift Ltd owned the following items of property, plant and equipment as at 30 June 2023. Land (at cost) $120 000 Office building (at cost)
Swift Ltd owned the following items of property, plant and equipment as at 30 June 2023.
Land (at cost)
$120 000
Office building (at cost)
$15000
Accumulated depreciation
(23 375)
126625
Turf cutter (at cost)
65 000
Accumulated depreciation
(42230)
22770
Water desalinator (at fair value)
189 000
Additional information (at 30 June 2023)
The straight-line method of depreciation is used for all depreciable items of PPE. Depreciation is charged to the nearest month and all figures are rounded to the nearest dollar.
The office building was constructed on 1 April 2019. Its estimated useful life is 20 years and it has an estimated residual value of $40 000.
The turf cutter was purchased on 21 January 2020, at which date it had an estimated useful life of 5 years and an estimated residual value of $3200.
The water desalinator was purchased and installed on 2 July 2022 at a cost of $200 000. On 30 June 2023, the plant was revalued upwards by $7000 to its fair value on that day. Additionally, its useful life and residual value were re-estimated to 9 years and $18 000 respectively.
The following transactions occurred during the year ended 30 June 2024. (Note: All payments are made in cash.)
(i) On 10 August 2023 new irrigation equipment was purchased from Pond Supplies for $37000. On 16 August 2023, the business paid $500 to have the equipment delivered to the turf farm. William Wagtail was contracted to install and test the new system. In the course of installation, pipes worth $800 were damaged and subsequently replaced on 3 September. The irrigation system was fully operational by 19 September and William Wagtail was paid $9600 for his services. The system has an estimated useful life of 4 years and a residual value of $0.
(ii) On 1 December 2023, the turf cutter was traded in on a new model worth $80 000. A trade-in allowance of $19 000 was received and the balance paid in cash. The new machines useful life and residual value were estimated at 6 years and $5000 respectively.
(iii) On 1 January 2024, the turf farms owner decided to extend the office building by adding three new offices and a meeting room. The extension work started on 2 February and was completed by 28 March at a cost of $49 000. The extension is expected to increase the useful life of the building by 4 years and increase its residual value by $5000.
(iv) On 30 June 2024, depreciation expense for the year was recorded. The fair value of the water desalination plant was $165 000.
Required
1. Prepare general journal entries to record the transactions and events for the reporting period ended 30 June 2024 in relation to the following assets:
(a) Office building
(b) Turf cutters
(c) Water desalinator
(d) Irrigation equipment
2. What choices of measurement model exist subsequent to assets being initially recognised?
3. Why should an entity consider changing to an alternative measurement model?
Question 2 is charged to the nearest month and all figures are moundod to the nenet dollar. is has an estimated residal value of $40000. - The turf cufter was purctused on 21 Janary 2000 , at which diac it had an extimatod usefill life of 5 ycien and an estimated residual valuc of 5320 e 30 hane 2023, the plant was revaluod sywards by 5700 in ite fier valas on that doy. respoctively. made in cash) (i) On 10 August 2023 new imrigation equipmest as purchased fom Pond Sepplies for Septenber. The irrigatien system was fully eperabiend by 19 September and Milliam and a residual value of 30 . in allowance of 919000 was roveivod and the tulmoe puid in cah. The new michine's usctul life and roidal value werc otimand at 6 yers ind 5500 tenpectively. useful life of the hailfing by 4 years and incrcase in resided valoe by 55000 (iv) On 30 June 2024, dopecciation cepense for the year was rooondod. The fair valos of the water desalinution plant was $165 to00 1 Hequired endod 40 June 20C4 in relaticen to the following avets: (a) Oorice builing (b) Turi cutters (c) Waice desalinator (d) Imigation squprncet 2. What choices of mensurement model exia subsequerr so aucts beies ininally seoognised
Swift Ltd owned the following items of property, plant and equipment as at 30 June 2023.
Land (at cost) |
| $120 000 |
|
Office building (at cost) | $15000 |
|
|
Accumulated depreciation | (23 375) | 126625 |
|
Turf cutter (at cost) | 65 000 |
|
|
Accumulated depreciation | (42230) | 22770 |
|
Water desalinator (at fair value) |
| 189 000 |
|
Additional information (at 30 June 2023)
The straight-line method of depreciation is used for all depreciable items of PPE. Depreciation is charged to the nearest month and all figures are rounded to the nearest dollar.
The office building was constructed on 1 April 2019. Its estimated useful life is 20 years and it has an estimated residual value of $40 000.
The turf cutter was purchased on 21 January 2020, at which date it had an estimated useful life of 5 years and an estimated residual value of $3200.
The water desalinator was purchased and installed on 2 July 2022 at a cost of $200 000. On 30 June 2023, the plant was revalued upwards by $7000 to its fair value on that day. Additionally, its useful life and residual value were re-estimated to 9 years and $18 000 respectively.
The following transactions occurred during the year ended 30 June 2024. (Note: All payments are made in cash.)
(i) On 10 August 2023 new irrigation equipment was purchased from Pond Supplies for $37000. On 16 August 2023, the business paid $500 to have the equipment delivered to the turf farm. William Wagtail was contracted to install and test the new system. In the course of installation, pipes worth $800 were damaged and subsequently replaced on 3 September. The irrigation system was fully operational by 19 September and William Wagtail was paid $9600 for his services. The system has an estimated useful life of 4 years and a residual value of $0.
(ii) On 1 December 2023, the turf cutter was traded in on a new model worth $80 000. A trade-in allowance of $19 000 was received and the balance paid in cash. The new machines useful life and residual value were estimated at 6 years and $5000 respectively.
(iii) On 1 January 2024, the turf farms owner decided to extend the office building by adding three new offices and a meeting room. The extension work started on 2 February and was completed by 28 March at a cost of $49 000. The extension is expected to increase the useful life of the building by 4 years and increase its residual value by $5000.
(iv) On 30 June 2024, depreciation expense for the year was recorded. The fair value of the water desalination plant was $165 000.
Required
1. Prepare general journal entries to record the transactions and events for the reporting period ended 30 June 2024 in relation to the following assets:
(a) Office building
(b) Turf cutters
(c) Water desalinator
(d) Irrigation equipment
2. What choices of measurement model exist subsequent to assets being initially recognised?
3. Why should an entity consider changing to an alternative measurement model?
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