Pownall Inc. reports using IFRS and uses the revaluation method to account for P

Question

Pownall Inc. reports using IFRS and uses the revaluation method to account for PPE under IAS 16. The company acquired a printing press on January 1, 2011. The press had an expected useful life of 10 years and zero residual value. The cost of the press was $100,000. Pownall uses straight-line depreciation and the depreciation-elimination method for revaluations. On December 31, 2013, the fair value of the press was $71,000. On December 31, 2016, the fair value of the press was $40,000. Provide all necessary journal entries for 2011 through 2016.

Explanation / Answer

Journal Entry in the books of Pownall Inc. (Amount in $)

Accumulated Depreciation Dr.

(10,000*3 years)

Accumulated Depreciation Dr.

(10,143*3 years)

As the company's method for revaluation is depreciation elimination thus entire accumulated depreciation till the date of revaluation is debited for revaluation of Printing Press on Dec 31,2013 and Dec. 31,2016.

Date Particulars Debit Amount Credit Amount Jan 1,2011 Printing Press Dr. 100,000 To Cash 100,000 Dec 31,2011, 2012 and 2013 Depreciation (100,000/10) Dr. 10,000 To Accumulated Depreciation 10,000 Dec 31,2011, 2012 and 2013 Income Statement Dr.   10,000 To Depreciation 10,000 Dec 31,2013 Printing Press (Fair value) Dr. 71,000

Accumulated Depreciation Dr.

(10,000*3 years)

30,000 To Printing Press (cost) 100,000 To Gain on revaluation (bal Figure) 1,000 Dec 31,2013 Gain on Revaluation Dr. 1,000 To Income Statement 1,000 Dec 31,2014, 2015 and 2016 Depreciation (71,000/7 years) Dr. 10,143 To Accumulated Depreciation 10,143 Dec 31,2014, 2015 and 2016 Income Statement Dr. 10,143 To Depreciation 10,143 Dec 31,2016 Printing Press (Fair Value) Dr. 40,000

Accumulated Depreciation Dr.

(10,143*3 years)

30,429 Loss on revaluation (Bal. fig.) Dr. 571 To Printing Press (Fair Value) 71,000

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