Question - Pacific Ventures Limited (PVL) acquired the following assets on 1 January 2017. Information relevant to the assets are provided below:
|
Items of asset
|
Acquisition costs ($)
|
Useful economic life
|
|
Land
|
400.000
|
n/a
|
|
Building
|
700.000
|
50 years
|
|
Equipment
|
400.000
|
5 years
|
|
Furniture
|
105.000
|
15 years
|
The following additional costs were incurred in relation to the assets acquired:
|
Legal fees and registration charges on land
|
$25,000
|
|
Legal fees on building
|
6,000
|
|
Freight in importing the equipment
|
5,000
|
|
Import duty on equipment
|
2,000
|
|
Customizing the factory floor
|
25,000
|
|
Installation of equipment
|
12.000
|
The suppliers delivered the furniture to PVL free of cost.
Subsequent fair values less costs of disposal of the assets were determined as follows:
|
Date
|
Items of asset
|
Fair value ($)
|
|
1 January 2018
|
Land
|
450.000
|
|
Building
|
800.000
|
|
Equipment
|
200.000
|
|
Furniture
|
70,000
|
|
1 January 2020
|
Land
|
350.000
|
|
Building
|
450.000
|
|
Equipment
|
160,000
|
|
Furniture
|
50,000
|
The company uses straight-line method of depreciation for its non-current assets and uses fair value (i.e.. the revaluation model) for financial reporting purposes. Estimated residual values upon expiry of respective useful economic lives of building. equipment and furniture are Zero.
Required - Prepare journal entries to record the acquisition of the assets on 1 January 2017 and the changes in asset values on 1 January 2018 and 2020.