Question
Asked Mar 11, 2020
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Hand Creamy Limited purchased a land for $150,000 cash on 1 September 2016 and a machine for $300,000 cash on 1 July 2017. The useful life of the machine is 10 years, no residual value and straight line method for depreciation. The company uses the revaluation model for those assets. On 31 December 2017, the fair value of the land was $200,000 and $332,500 for the machine. On 31 December 2018, the fair value of the land was $130,000 and $280,500 for the machine. On 1 March 2019, the land was sold for $120,000 by cash. The machine has a fair value of $305,500 on 31 December 2019. The balance day is 31 December.

Required a) Provide the journal entries related to the land and machine.

b) Disclose the extract of Balance Sheet, Income Statement and Statement of Comprehensive Income for the land at 31 December 2016, 2017, 2018 and 2019. Use the table provided. (see photo attached)

 

Hand Creamy Limited
31 December
31 December
31 December
31 December
2016
2017
2018
2019
Balance Sheet
Non-current assets
Land
Equity
Revaluation surplus
Income Statement
Other income and expenses
Loss on revaluation
Loss on disposal
Statement of Comprehensive Income
Unrealised gain
Revaluation surplus
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Hand Creamy Limited 31 December 31 December 31 December 31 December 2016 2017 2018 2019 Balance Sheet Non-current assets Land Equity Revaluation surplus Income Statement Other income and expenses Loss on revaluation Loss on disposal Statement of Comprehensive Income Unrealised gain Revaluation surplus

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Expert Answer

Step 1

a)

Depreciation:

Machinery = Cost/ life

                   = $300,000/10 years

                   = $30,000

Let's assume the life of land is 10 years

Land = Cost/ life

         = $150,000/10

          = $15,000

 

Following are the journal entries:

Accounting homework question answer, step 1, image 1

Accounting homework question answer, step 1, image 2

 

 ...

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