Question 4 (16 marks) Rooey Ltd, the retailer of Zara clothing, is preparing its end of...

  

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Question 4 (16 marks) Rooey Ltd, the retailer of Zara clothing, is preparing its end of year financial statements at 31 December 2020. The balance sheet shows only two non-current assets, buildings and equipment. After depreciation entries were completed for the year ending 31 December 2020, the accumulated depreciation of its non-current assets were as follows: $ Buildings Accumulated Depreciation Buildings Equipment Equipment Accumulated Depreciation 24,200,000 (5,000,000) The company applies the revaluation model to buildings and the cost model to equipment. At 31 December 2020, the following values relating to the assets have been determined: Fair value Value in use Costs to sell $15,600,000 $600,000 $1,300,000 $300,000 $15,500,000 $1,700,000 7,000,000 (3,800,000) Required: (a) Prepare the necessary general journal entries in relation to the equipment for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required). [4 marks] (b) Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required). [6 marks] (c) Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2021 and justify in accordance with appropriate accounting standards. Assume the depreciation for the year is $1,000,000 and the fair value of the buildings at 31 December 2021 was $25,000,000. Show all workings (narrations are not required). [6 marks] 6 Question 4 (16 marks) Rooey Ltd, the retailer of Zara clothing, is preparing its end of year financial statements at 31 December 2020. The balance sheet shows only two non-current assets, buildings and equipment. After depreciation entries were completed for the year ending 31 December 2020, the accumulated depreciation of its non-current assets were as follows: $ Buildings Accumulated Depreciation Buildings Equipment Equipment Accumulated Depreciation 24,200,000 (5,000,000) The company applies the revaluation model to buildings and the cost model to equipment. At 31 December 2020, the following values relating to the assets have been determined: Fair value Value in use Costs to sell $15,600,000 $600,000 $1,300,000 $300,000 $15,500,000 $1,700,000 7,000,000 (3,800,000) Required: (a) Prepare the necessary general journal entries in relation to the equipment for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required). [4 marks] (b) Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required). [6 marks] (c) Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2021 and justify in accordance with appropriate accounting standards. Assume the depreciation for the year is $1,000,000 and the fair value of the buildings at 31 December 2021 was $25,000,000. Show all workings (narrations are not required). [6 marks] 6

Answer rating: 100% (QA)

Given information Building Equipment Cost of the asset 24200000 7000000 Accumulated depreciation 5000000 3800000 Carrying amount of the asset 19200000 ... View the full answer