Q3. As at 1 July 2018, Farrelly Ltd has an item of machinery that originally cost $40 000 and has accumulated depreciation of $15 000. Its remaining life is assessed to be five years, after which time it will have no residual value. Farrelly decided on 1 July 2018 that the item should be revalued to its current fair value, which was assessed as $45 000. 1. What is the total revaluation increment of this machinery? 2. What the journal entries on 1 July 2018 would be
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Q3. As at 1 July 2018, Farrelly Ltd has an item of machinery that originally cost $40 000 and has
1. What is the total revaluation increment of this machinery?
2. What the
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