Orbit Company acquired equipment on January 1, 2015, for $36,000. Orbit elects t

Question

Orbit Company acquired equipment on January 1, 2015, for $36,000. Orbit elects to value this class of equipment using revaluation accounting as permitted by International Financial Reporting Standard. This equipment is being depreciated on a straight-line basis over its 6-year useful life. There is no residual value at the end of the 6-year period. On December 31, 2015, the fair value of the equipment is determined to be $32,000. After recording depreciation for year 2015, the entry to revalue the equipment would include:

Credit unrealized gain from revaluation by $3,000.

Debit unrealized gain from revaluation by $4,200.

Debit accumulated depreciation by $6,000.

Credit equipment by $10,000.

Explanation / Answer

Date of acqusition   :    01-01-2015

Cost                          : 36,000

Life                           : 6 years

Depreciation:    Straight line with no salvage value:        36,000/6    = 6,000

WDV of assets as on 31/12/2015         :    30.000

Fair vale                                                 :   32,000

Revaluation                                             :   2,000

Credit unrealised gain on revaluation : 2,000

Debit assets: 2,000

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