Question

Question 2: Wastewater Ltd acquired an item of plant on 1 July 2016 for $3 660 000. When the item of plant was acquired, it was initially assessed as having a life of 10000 hours. During the reporting period ending 30 June 2017 the plant was operated for 3000 hours.

At 1 July 2017 the plant had a remaining useful life of 7000 hours. On 1 July 2017 the plant underwent a major upgrade costing $234 600. Management believes that this upgrade will add a further 2000 hours of operating time to the plant's life. During the reporting period ended 30 June 2018 the plant was operated for 4000 hours.

On 1 July 2018 the plant underwent a further major upgrade, the cost of which amounted to $344 900, and this added a further 3100 hours' operating time to its life. During the reporting period ending 30 June 2019 the plant was operated for 3800 hours.

Required: Prepare all the journal entries that Wastewater Ltd would prepare for the years ending 30 June 2017, 30 June 2018 and 30 June 2019 to account for the acquisition, subsequent expenditure and depreciation on the asset.

Please don't copy other CHEGG ANSWERS because they are not answered according to the question. please answer according to question and marks

Answer 1

For the period ending 30th June 2017

Cost of the Asset = $3,660,000

Useful hours = 10,000 hours

Hours operated during the year = 3,000 hours

Depreciation for the year =   Cost   * Hours used

   Useful hours

= 3,660,000/10,000 * 3,000

= $1,098,000

Carrying value of plant as on 30 June 2017 = 3,660,000-1,098,000

= $2,562,000

For the period ending 30th June 2018

Addition to plant = $234,600

Revised value of plant = 2,562,000+234,600 = $2,796,600

Revised useful hours = 7,000+2,000 = 9,000 hours

Hours operated during the year = 4,000 hours

Remaining useful hours = 9,000 - 4,000 = 5,000 hours

Depreciation for the year =   Cost   * Hours used

   Useful hours

= 2,796,600/9,000 * 4,000

= $1,242,933

Carrying value of plant as on 30 June 2018 = 2,796,600-1,242,933

= $1,553,667

For the period ending 30th June 2019

Addition to plant = $344,900

Revised value of plant =1,553,667+344,900 = $1,898,567

Revised useful hours = 5,000+3,100 = 8,100 hours

Hours operated during the year = 3,800 hours

Remaining useful hours = 8,100 - 3,800 = 4,300 hours

Depreciation for the year =   Cost   * Hours used

   Useful hours

=1,898,567/8,100 * 3,800

= $890,686

Carrying value of plant as on 30 June 2019 = 1,898,567- 890,686

=$1,007,881

Date	General Journal	Debit	Credit
1 July 2016	Plant	3,660,000
	Cash		3,660,000
30 June 2017	Depreciation	1,098,000
	Plant		1,098,000
1 July 2017	Plant	234,600
	Cash		234,600
30 June 2018	Depreciation	1,242,933
	Plant		1,242,933
1 July 2018	Plant	344,900
	Cash		344,900
30 June 2019	Depreciation	890,686
	Plant		890,686