Question

In: Accounting

Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost...

Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost of $61,000. The life of the asset is assessed as being six (6) years, after which time Max Ltd expects to be able to dispose of the asset for $6,000. It is expected that the benefits will be generated in a pattern that is best reflected by the sum—of—digits depreciation approach. On 1 July 2019, owing to unforeseen circumstances, the machinery is exchanged for a motor vehicle. Note the motor vehicle is two years old, originally cost $17,000 and has a fair value of $11,000.

Required: Provide the necessary journal entries for the disposal of the machinery and the acquisition of the motor vehicle on 1 July 2019.

Solutions

Expert Solution

ANSWER:::

Cost of machinery = $ 61,000

Salvage value = $ 6000

Useful life = 6 years

Year                                                   Depreciation

31st July 2017                                  61000-6000*6/21= 15714

31st July 2018                                 61000-6000*5/21= 13095

31st July 2019                                 61000-6000*4/21= 10476

$39285

                                                                                              

Book value on 31st July 2019   = 61000- 39285 = 21715

Journal Entry:

Date                      Accounts Title                             Debit                credit

31st July 2019     Motor vehicle                            $11,000

                            Accumulated depreciation $ 39285

                             Loss on disposal                       10,715

                             Cost of machine $ 61,000

To record the machine is exchanged for loss with motor vehicle

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

On 1 July 2018 Fraser Ltd acquired an item of equipment with an acquisition cost of...
On 1 July 2018 Fraser Ltd acquired an item of equipment with an acquisition cost of $400,000. The equipment can be used for 8 years. On 30 June 2019, the end of financial year, the fair value of the equipment was $357,000. The equipment was sold for $330,000 on 1 January 2020. Non-current asset is depreciated evenly over the useful life and has no residual value. The company uses the revaluation model to record non-current asset. The income tax rate...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date it was estimated that the item of machinery had a useful life of seven years and zero residual value. Blenheim Ltd uses the cost model to measure items of property, plant and equipment and the straight-line method of depreciation. Blenheim Ltd has a 30 June reporting date. In relation to the item of machinery, Blenheim Ltd has identified indicators of impairment for the reporting...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date it was estimated that the item of machinery had a useful life of seven years and zero residual value. Blenheim Ltd uses the cost model to measure items of property, plant and equipment and the straight-line method of depreciation. Blenheim Ltd has a 30 June reporting date.   In relation to the item of machinery, Blenheim Ltd has identified indicators of impairment for the reporting...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date...
On 1 July 2017, Blenheim Ltd purchased an item of machinery for $280,000. On this date it was estimated that the item of machinery had a useful life of seven years and zero residual value. Blenheim Ltd uses the cost model to measure items of property, plant and equipment and the straight-line method of depreciation. Blenheim Ltd has a 30 June reporting date. In relation to the item of machinery, Blenheim Ltd has identified indicators of impairment for the reporting...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000...
On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent. Required: Pass the necessary entries on 30 June 2017 and 30 June 2018 to eliminate the...
Black Ltd owns 100% of Canary Ltd. At 1 July 2016, Black Ltd sold an item...
Black Ltd owns 100% of Canary Ltd. At 1 July 2016, Black Ltd sold an item of plant to Canary Ltd for $210 000. Black Ltd had originally paid $400 000 for the plant on 1 July 2014, when it had an expected useful life of 8 years. The tax rate is 30%. (a)  To eliminate the gain or loss on sale of the asset for the year, the group accountant processes the following entry in the consolidation worksheet: Dr Gain...
On July 1, 2016, Crane Company sells machinery for $210500. The machinery originally cost $585000, had...
On July 1, 2016, Crane Company sells machinery for $210500. The machinery originally cost $585000, had an estimated 5-year life and an expected salvage value of $60000. The Accumulated Depreciation account had a balance of $367500 on January 1, 2016, using the straight-line method. The gain or loss on disposal is $45500 gain. $97000 gain. $22750 loss. $97000 loss.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT