\$20 Bonus + 25% OFF

financial accounting Solved

Referencing Styles : APA | Pages : 7
Jeanette Harris Completed Orders: 2636 5/5
Customer Feedback   4/5

I love it. It is done earlier than due time and I have time to add my own point. Use own word and well written.

 Financial Accounting

Contents

b) Revaluation model 6

c) Impairment of land. 7

Journal entries of Gold Well Ltd

Gold well Ltd

Journal entries

For the period 1st July 2012 to 30th June 2015

 Date Particulars Amount \$ Amount \$ 1St July 2012 Dr. Land Cr. Bank 3000000 3000000 2012 1st July Dr. Building Cr. Bank 2000000 2000000 30th June 2013 Dr. Impairment Loss Cr. Accumulated impairment Loss (on land) 600000 600000 30th June 2013 Dr. Accumulated Depreciation Cr. Machine 500000 500000 30Th June 2013 Dr. Machine Cr. Revaluation Surplus 700000 700000 30th June 2014 Dr. Impairment loss 1 Dr. Impairment loss 2 Cr. Accumulated Impairment loss (on land) 600000 600000 1200000 30th June 2014 Dr. Revaluation Surplus Cr. Machine 66667 66667 30th June 2015 Dr. Revaluation surplus Cr. Machine 133334 133334

Workings

Note 1

On 30th June 2013

Land

Carrying amount = Cost – Accumulated Depreciation – Accumulated impairment loss

= \$ 3000000- nil- Nil

= \$ 3000000

Recoverable amount = higher of (Fair value – cost of disposal) and value in use

= (2500000-200000) or 2400000 [higher of two]

= \$ 2300000 or \$ 2400000

= \$ 2400000

Impairment loss = (carrying amount – recoverable amount)

= (3000000-2400000)

= \$ 600000

Here the valuation on land is made on cost model. As land is a non depreciable assert so no depreciation is charged on it (Pakhomov, 2015).

Machinery

The valuation of machinery is done on the basis of revaluation model.

The cost of the asset is \$ 2000000 and the life is four years. If depreciation is charged on the strait line basis then the accumulated depreciation will be (\$ 2000000/4) = \$ 500000

Carrying amount = (\$ 2000000- 500000)

= \$ 1500000

Recoverable amount = ( \$ 2200000-Nil) or Nil

= \$ 2200000

Revaluation surplus = \$ 2200000-(2000000-500000)

= \$ 700000

As here in this case the carrying amount is less than the recoverable amount so there is no question of impairment loss.

Note 2

On 30th June 2014

Land

Carrying amount = \$ 3000000

Recoverable amount = \$ (2400000-150000-600000) or \$ 2400000

= \$ 1650000 or \$ 2400000 [higher of two]

= \$ 2400000

Impairment loss = (\$ 3000000-\$ 2400000)

= \$ 600000

Accumulated impairment loss for two years = \$ (600000+600000)

= \$ 1200000

Machinery

Depreciation in this year on machinery will be charged on the basis of the revalued model. The amount will be last year fair value divide the remaining years.

Depreciation = \$(2200000/3) = \$ 733333

Fair value = \$ 1400000

Carrying amount = \$ (2200000-733333)

= \$ 1466667

Impairment loss = \$ (1466667-1400000)

= \$ 66667 (deducted from revaluation surplus)

Note 3

30th June 2015

Land

Carrying amount = \$ 3000000

Recoverable amount =\$ (2800000-200000-1200000) = \$ 1400000 or \$3200000

There is no impairment loss.

Machinery

Depreciation =\$(1466667/2) = \$ 733333

Fair value = \$ 600000

Carrying amount =\$ (1466667- 733333)

Carrying amount = \$ 733334

Impairment loss = \$ (733334-600000)

= \$ 133333

All the calculations and journal entries are made in accordance with the AASB 116 and 136.

(Dai, Mao & Deng, 2007)

b) Revaluation model

Revaluation of the noncurrent assets means increase or decrease in the carrying value of the fixed asset. The very nature of the fixed asset implies that it has an economic life of more than one year so the benefit derived from the fixed assets should be utilized for the whole economic life of the assets. One the other, fair value means the value at which the buyers are willing to buy the assets and the sellers are supposed to sell (Laing & Perrin, 2014). In simple terms, it is the market value of any asset at present. Due to the change in the supply and demand in the market the price of the commodity are getting changed and as a result the value of the assets are also fluctuating. Moreover, most of the fixed assets are depreciable. So it is very obvious that the fair market price of the asset and the carrying amount will not be the same. At this point of time if the assets are recorded only at the cost price throughout its life then the result will be misleading. Therefore, as per the AASB 116 there are some regulations for revaluation of the fixed assets in order to match with the fair value. In revaluation model the asset is initially recorded as cost price but then it is increased by its current amount with the appreciation of the values (Dayan & Berridge, 2014). The main difference between the cost model and the revaluation model is that the cost model only considers the decrease in the value which is termed as the impairment cost but the revaluation model considers both upward and downward adjustments. The frequency of making the revaluation of fixed assets depends upon the frequency at which the fair value changes. If there is no availability of the market evidence of the fair value of any asset or the asset is sold very rarely then an assumption of the fair value should be made on the basis of depreciated replacement cost approach (Andric, Mijic & Jaksic, 2011).

c) Impairment of land

Yes, the impairment loss is applicable in the case of land. The procedure of calculating the impairment loss is discussed as per AASB 136. In this standard, it is said that if the carrying amount of a noncurrent asset is more than the recoverable amount then it must be matched with the recoverable amount. For this purpose, the value of the assets must be reduced to its recoverable value. The value reduction is known as the impairment loss (Detzen, Wersborg & Zülch, 2015). When an asset is recorded at cost, then the AASB 136 is applied on it. The land is treated as the non-depreciable assets and always record at a cost. The reason behind this is land has an infinite life, so it is not possible to calculate the economic life and thus the depreciation calculation is not possible (Laing & Perrin, 2014). The impairment procedure is applicable if there are any significant changes in the asset market value or when there is an evidence of any damage or physical obsolescence. The land is such an asset that can have different market value or that can be damaged due to natural calamities or any other reason. Though the depreciation is not applicable on the land but the fair value concept is same as the other depreciable assets. So in order to calculate the value of the land in an efficient way the impairment loss is applicable on land provided that the conditions mentioned as per the AASB 136 must be fulfilled (BOYMAL, 2007).

References

Andric, M., Mijic, K., & Jaksic, D. (2011). Financial reporting and characteristics of impairment of assets in the republic of Serbia, according to IAS/IFRS and national regulation. Ekonomski Anali, 56(189), 101-116. doi:10.2298/eka1189101a

BOYMAL, D. (2007). The Work Program and Priorities of the AASB. Australian Accounting Review, 17(42), 3-7. doi:10.1111/j.1835-2561.2007.tb00437.x

Dai, D., Mao, X., & Deng, F. (2007). A research on impairment of assets in listed firms with negative earnings in China. Front. Bus. Res. China, 1(3), 351-364. doi:10.1007/s11782-007-0020-1

Dayan, P., & Berridge, K. (2014). Model-based and model-free Pavlovian reward learning: Revaluation, revision, and revelation. Cogn Affect Behav Neurosci, 14(2), 473-492. doi:10.3758/s13415-014-0277-8

Detzen, D., Wersborg, T., & Zülch, H. (2015). Bleak Weather for Sun-Shine AG: A Case Study of Impairment of Assets. Issues In Accounting Education, 30(2), 113-126. doi:10.2308/iace-51007

Laing, G., & Perrin, R. (2014). Deconstructing an accounting paradigm shift: AASB 116 non-current asset measurement models. IJCA, 6(5/6), 509. doi:10.1504/ijca.2014.068404

Laing, G., & Perrin, R. (2014). Deconstructing an accounting paradigm shift: AASB 116 non-current asset measurement models. IJCA, 6(5/6), 509. doi:10.1504/ijca.2014.068404

Pakhomov, A. (2015). THE METHOD OF THE ANALYSIS OF THE IMPAIRMENT LOSSES OF ASSETS AND THEIR REIMBURSEMENT. V Mire Nauchnykh Otkrytiy, 0(1), 118. doi:10.12731/wsd-2015-1-9

Solutions

OR

Just share requirement and get customized Solution.

Orders

Overall Rating

Experts

Our Amazing Features

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat. If you are unable to calculate word count online, ask our customer executives.

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

5/5

1692 Order Completed

98% Response Time

Alfred Dodd

Wellington, New Zealand

5/5

2632 Order Completed

100% Response Time

Albert Ambrosio

London, United Kingdom

5/5

154 Order Completed

97% Response Time

Harold Alderete

London, United Kingdom

5/5

752 Order Completed

100% Response Time

FREE Tools

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

Essay Typer

Get different kinds of essays typed in minutes with clicks.

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than \$2000

1

1

1

Live Review

Our Mission Client Satisfaction

very fast and impressive work. All the members are very polite band helpful in each way

User Id: 528797 - 26 Oct 2020

Australia

I put the wrong date for completion of the assignment and when I asked the executive to see if it is possible to move the day to today, she did so without hesitation and the assignment quality was mot compromised. Thank You

User Id: 522996 - 26 Oct 2020

Australia

i got good grades with the help of my assisgnment. i am not at writing this helped me a lot.

User Id: 496434 - 26 Oct 2020

Australia

Hi, This solution has allowed me to pass my assignment. Well Done! and keep this up. Thank you.

Australia