Related questions
Property, plant and equipment
Ian has provided you with the details of the delivery trucks included in the PPE above, as summarised below:
|
Delivery trucks |
|||
|
Urban Swift |
Metro Mover |
Total |
|
|
$ |
$ |
||
|
At cost |
114,000 |
85,000 |
199,000 |
|
|
(34,200) |
(4,250) |
(38,450) |
|
Carrying amount – 1 April 2023 |
79,800 |
80,750 |
160,550 |
|
Depreciation |
(11,400) |
(8,500) |
(19,900) |
|
Carrying amount – 31 March 2024 |
68,400 |
72,250 |
140,650 |
|
Remaining useful life as at 1 April 2024 |
6 years |
8.5 years |
|
Urban Swift is a Ford F-150 four-door pickup truck with an open cargo at the rear. Ford Australia has stopped producing this model of vehicle and its resale value has improved given the constant demand for this type of truck. Metro Mover is an 18-wheeler truck used for long-distance transport on highways. Both the delivery trucks are
The directors of SLSL have decided to adopt the revaluation model as allowed in AASB 116 for Urban Swift from 1 April 2024 given its increased demand. As for Metro Mover, since its value is deteriorating, the directors prefer to retain the cost model for that vehicle. For this purpose, the fair values have been determined to be:
|
|
Urban Swift |
Metro Mover |
|
Fair value as at |
$ |
$ |
|
1 April 2024 |
72,000 |
73,525 |
|
1 April 2025 |
61,000 |
63,000 |
Upon revaluation, both the trucks would be depreciated on a straight-line basis over their remaining useful lives. Ignore any tax effect arising from the revaluation exercise.
- Advise the directors if it is possible to adopt the revaluation model for Urban Swift and retain the current cost model for Metro Mover. Support your answers with specific references made to AASB 116.
- Assume that the directors have decided to adopt the revaluation model for all trucks from 1 April 2024. Based on the information provided, determine if there are any gains or losses on revaluation for the trucks on both 1 April 2024 and 1 April 2025.
- Advise the directors if any gain on revaluation from one truck can be used to offset any loss on revaluation for the other? Why? Provide specific reference made to AASB 116.
- Show all relevant
journal entries required to record any depreciation and revaluation for the trucks for the revaluation exercises on both 1 April 2024 and 1 April 2025. - Explain how professional judgement would have been applied in the above revaluation exercises. (3 marks)
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