Hi, I tried posting this awhile ago, but still haven\'t heard from anyone. I\'m

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Hi, I tried posting this awhile ago, but still haven't heard from anyone. I'm not sure how to prepare the journal entry. This is ALL the information I was given and should be sufficient to answer. Again, I'm using another one of my questions because I have not heard from anyone. I already posted this question before.

Exercise 11-17 (Part Level Submission)

Presented below is information related to equipment owned by Suarez Company at December 31, 2014.

Cost $ 17,010,000
Accumulated depreciation to date 1,890,000
Expected future net cash flows 13,230,000
Fair value 9,072,000

Suarez intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $ 37,800 . As of December 31, 2014, the equipment has a remaining useful life of 5 years.
The asset was not sold by December 31, 2015. The fair value of the equipment on that date is $10,017,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $37,800.

Explanation / Answer

Book value = cost - accumulated depreciation till date = 17,010,000 - 1,890,000 = $15,120,000

Increase in fair value as on December 31, 2015: 10,017,000 - 9,072,000 = $945,000. To value the equipment at fair value we use the revaluation model: 15,120,000 - 9,072,000 = 6,048,000. The journal entry here will be:

Revaluation surplus (Dr) 6,048,000

Equipment (Cr) 6,048,000

Change in fair value = 10,017,000 - 9,072,000 = $945,000. Change in fair value net of cost of disposal = 945,000 - 37,800 = $907,200. This is an increase in the fair value of equipment.

Journal entry:

Equipment (Dr) $907,200

Revaluation surplus (Cr) $907,200

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