On 1 April 2021, PHI plc acquired a new machine for a price of £25,000. On the same day, PHI paid £5,000 for a staff training session on how to operate the machine. For the subsequent measurement of the machine, PHI chose the revaluation model and the diminishing balance method with an annual rate of 30%. PHI expects to use the machine for 10 years and to dispose of it at the end of these 10 years (residual value of £0). On 31 December 2021, the machine has a fair value of £23,000; on 31 December 2022, the machine has a fair value of £12,000. PHI has a fiscal year ending 31 December.

REQUIRED:

i) Explain what the subsequent measurement of the machine tells you about the subsequent measurement of other items of property, plant and equipment (PPE).

ii) Calculate the relevant amounts and prepare the journal entries for the initial recognition and subsequent measurement of the machine in fiscal years 2021 and 2022. Explain each of your steps.)

3)On 31 December 2021, annual depreciation for PPE items other than the machine amounts to £37,000. Based on the balance sheet extract in a), derive the value of accumulated depreciation on 31 December 2021. Explain your steps.

Answer rating: 100% (QA)

Working of depreciation on diminishing balance 30 Year Book Val Dep Net Val 1 30000 250005000 6750 23250 2 23250 6975 16275 3 16275 48825 113925 4 113... View the full answer