Question

A partial statement of financial position of Wildhorse Ltd. on December 31, 2019, showed the following property, plant, and equipment assets accounted for under the cost model (accumulated depreciation includes depreciation for 2019): Buildings Less: accumulated depreciation Equipment Less: accumulated depreciation $326,000 126,000 $200,000 $125,000 45,000 80,000 Wildhorse uses straight-line depreciation for its building (remaining useful life of 20 years, no residual value) and for its equipment (remaining useful life of 8 years, no residual value). Wildhorse applies IFRS and has decided to adopt the revaluation model for its building and equipment, effective December 31, 2019. On this date, an independent appraiser assessed the fair value of the building to be $150,000 and that of the equipment to be $108,000.

Answer 1

Requirement a: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Dec 31	Accumulated Depreciation - Buildings	$126,000
2019	Buildings		$126,000
	To record elimination of accumulated depreciation on building
	Revaluation Gain or Loss ($200,000 − $150,000)	$50,000
	Buildings		$50,000
	To record revaluation loss on buildings
Dec 31	Accumulated Depreciation - Equipment	$45,000
2019	Equipment		$45,000
	To record elimination of accumulated depreciation on Equipment
	Equipment ($108,000 − $80,000)	$28,000
	Revaluation Surplus - OCI		$28,000
	To record revaluation surplus

Requirement b: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Dec 31	Depreciation Expense ($150,000 ÷ 20 years)	$7,500
2019	Accumulated Depreciation - Buildings		$7,500
	To record depreciation expense on buildings
	Equipment ($108,000 ÷ 8 years)	$13,500
	Accumulated Depreciation - Equipment		$13,500
	To record depreciation expense on equipment

Requirement c: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Dec 31	Accumulated Depreciation - Buildings ($126,000 − $94,500)	$31,500
2019	Revaluation Gain or Loss ($200,000 − $150,000)	$50,000
	Buildings ($31,500 + $50,000)		$81,500
	To record revaluation of buildings
	Equipment ($15,750 + $28,000)	$43,750
	Accumulated Depreciation - Equipment($60,750 − $45,000)		$15,750
	Revaluation Surplus - OCI ($108,000 − $80,000)		$28,000
	To record revaluation of equipment

Notes:

Particulars	Before Revaluation	Proportion	After Revaluation
Buildings	$326,000	$150,000 ÷ $200,000	$244,500
Deduct: Accumulated Depreciation	$126,000	$150,000 ÷ $200,000	$94,500
Carrying Amount	$200,000	$150,000 ÷ $200,000	$150,000
Equipment	$125,000	× $108,000 ÷ $80,000	$168,750
Deduct: Accumulated Depreciation	$45,000	× $108,000 ÷ $80,000	$60,750
Carrying Amount	$80,000	× $108,000 ÷ $80,000	$108,000

Requirement d: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Dec 31	Depreciation Expense ($150,000 ÷ 20 years)	$7,500
2019	Accumulated Depreciation - Buildings		$7,500
	To record depreciation expense on buildings
	Equipment ($108,000 ÷ 8 years)	$13,500
	Accumulated Depreciation - Equipment		$13,500
	To record depreciation expense on equipment