On 1 January 2015, based on a valuer's estimate of fair value, it was decided to revalue the plant to $65 000. The plant was then assessed to have a further useful life of 5 years and an expected residual amount of $5000. What is the journal entry in the books of Brown Ltd to record depreciation on plant on a straight-line basis for the half-year ending 30 June 2015 (balance date)?
A) Depreciation expense - plant 12 000 Accumulated depreciation- plant 12 000
B) Depreciation expense - plant 6 000 Accumulated depreciation - plant 6 000
C) Accumulated depreciation - plant 6 000 Depreciation expense - plant 6 000
D) Depreciation expense - plant 6 500 Accumulated depreciation- plant 6 500

Question

On 1 January 2015, based on a valuer's estimate of fair value, it was decided to revalue the plant to $65 000. The plant was then assessed to have a further useful life of 5 years and an expected residual amount of $5000. What is the journal entry in the books of Brown Ltd to record depreciation on plant on a straight-line basis for the half-year ending 30 June 2015 (balance date)?
A) Depreciation expense - plant 12 000 Accumulated depreciation- plant 12 000 
B) Depreciation expense - plant 6 000 Accumulated depreciation - plant 6 000 
C) Accumulated depreciation - plant 6 000 Depreciation expense - plant 6 000 
D) Depreciation expense - plant 6 500 Accumulated depreciation- plant 6 500

Quizplus · Accepted Answer

The revalued amount of the plant is $65,000 and the expected residual amount is $5,000, so the depreciable amount is $60,000 ($65,000 - $5,000). The useful life of the plant is 5 years so the annual depreciation would be $12,000 ($60,000 ÷ 5). Since the depreciation is being recorded for the half-year ending 30 June 2015, the journal entry would be: Depreciation expense - plant $6,000 and Accumulated depreciation- plant $6,000.

On 1 January 2015, Based on a Valuer's Estimate of Fair