Question

At 1 July 2017, Lobstar Ltd acquired the following non-current assets:

Equipment $100 000 Vehicles $80 000

They are in different classes of non-current assets and are to be measured at fair value. The expected useful lives of vehicles and equipment are 5 years and 10 years, respectively.

At 30 June 2015, the fair values of both assets were assessed. The equipment had a fair value of $82 000, and the vehicles, $70 000. The remaining useful lives were assessed to be 8 years for equipment and 7 years for vehicles.

Required
Prepare the journal entries for Lobstar Ltd for the years ending 30 June 2015 and 2016.

Answer 1

Lobstar Ltd.
Date	Particular	Ref. Post	Debit ($)	Credit ($)
30-Jun-15	Depreciation Expense a/c                                                            Dr.	W.N. 1	10,000
	To Accumulated Depriciation a/c			10,000
	(Depreciation charged on equipment)
	Accumulated Depreciation a/c                                                  Dr.		10,000
	To Equipment a/c			10,000
	(Value of equipment written down to $90,000)
	Loss on revaluation of equipment a/c                                    Dr.		8,000
	To Equipment a/c			8,000
	(Value of equipment decreased from $90,000 to $82,000)
	Depreciation expense a/c                                                           Dr.	W.N. 2	16,000
	To Accumulated depriciation a/c			16,000
	(Depreciation charged on vehicle)
	Accumulated Depreciation a/c                                                  Dr.		16,000
	To Vehicle a/c			16,000
	(Value of equipment written down to $90,000)
	Vehicle a/c                                                                                         Dr.		6,000
	To gain on revaluation of Vehicle a/c			6,000
	(Value of equipment increased from $64,000 to $70,000)
	Income tax expense		1,800

Depreciation = Value of asset - Scrap Value / Useful life

W.N. 1: Depreciation on Equipment = 1,00,000 - 0 / 10 = $10,000

W.N. 2: Depreciation on Vehicle = 80,000 - 0 / 5 = $16,000

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