Question 6

Abu Co purchased a piece of equipment on 1 July 2005 incurring the following costs:

Additional information:

• Expected useful life of 12 years and a residual value of €2,000.

• Abu Co’s policy is to charge a full year’s depreciation in the year of purchase and no depreciation in the year of sale.

• Abu Co follows the revaluation model. No revaluation had been necessary until 30 September 2008 when the price of these machines increased. A specific market value for the original machine was not available, but an equivalent new machine would now cost €15,200.

• Abu Co’s year end is 30 September.

Required:

Show the accounting effect of the above transaction at 30 September 2005, 2008 and 2009. Clearly indicate the amounts that will appear in the Statement of Financial Position at each period end.