Question # 6Plant, measured using the cost model, had a carrying amount of Rs.80,000 on 31 December 2002cost Rs.100,000, accumulated depreciation Rs.20,000.All criteria for classification as a non-current asset held for sale were met on 1 January 2003The following values were established on this dateFair value C70 000 Costs to sell C5 000Required:Show the journal entries relating to the reclassification of the plant assuming that:a. On 30 June 2003 (6-months later) the fair value is Rs.60,000 and expected costs to sellwas Rs.3,000b. On 30 June 2003 (6-months later) the fair value is Rs.70,000 and expected costs to sellwas Rs.2,000

The journal entries for the reclassification of the plant would be as follows:

a. On 30 June 2003 (6-months later) the fair value is Rs.60,000 and expected costs to sell was Rs.3,000

1 January 2003: Dr. Non-current asset held for sale Rs.80,000 Cr. Plant Rs.80,000 (Reclassification of plant to non-current asset held for sale)

Dr. Loss on reclassification Rs.10,000 Cr. Non-current asset held for sale Rs.10,000 (Recognition of loss on reclassification)

30 June 2003: Dr. Loss on remeasurement Rs.7,000 Cr. Non-current asset held for sale Rs.7,000 (Recognition of loss on remeasurement)

b. On 30 June 2003 (6-months later) the fair value is Rs.70,000 and expected costs to sell was Rs.2,000

1 January 2003: Dr. Non-current asset held for sale Rs.80,000 Cr. Plant Rs.80,000 (Reclassification of plant to non-current asset held for sale)

Dr. Loss on reclassification Rs.10,000 Cr. Non-current asset held for sale Rs.10,000 (Recognition of loss on reclassification)

30 June 2003: No entry needed as the fair value less costs to sell (Rs.70,000 - Rs.2,000 = Rs.68,000) is less than the carrying amount of the non-current asset held for sale (Rs.70,000).