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Stacey Ltd purchased a new machine on 1 September 2019 at a cost of $206,100 (excluding...

Stacey Ltd purchased a new machine on 1 September 2019 at a cost of $206,100 (excluding GST). The entity estimated that the machine has a residual value of $29,700 (excluding GST). The machine is expected to be used for 36,000 working hours during its 8 year life. Assume a 31 December year-end. Required (a) Calculate the depreciation expense using the straight-line method for 2019 and 2020. (b) Calculate the depreciation expense using the diminishing-balance method and a depreciation rate of 25% for 2019 and 2020. (c) Calculate the depreciation expense using the units-of-production method for 2019, assuming the machine usage was 1,820 hours. (d) On 31 December 2020 the company discarded a delivery truck that was purchased on 1 January 2016 for $24,200 cash (including GST of 10%) and was depreciated on a straight line basis with a useful life of 6 years and a residual value of $2200 (excluding GST). What was the profit or loss on the scrapping of the truck?

Solutions

Expert Solution

A Straight Line Method
A Cost of New Machine-01/09/2019                                     206,100
B Salvage Value                                        29,700
C Useful life                                                  8 Years
D=(A-B)/C Depreciaton P a                                        22,050
E=D/12 Depreciation P.M                                          1,838
F=E X4 Depreciation for 2019-4 months                                          7,350
Depreciation for 2020                                        22,050
B Diminishing Balance Method
Depreciation for 2019                                        17,175 (206100 X 25% X 4/12)
(4 months)
Depreciation for 2020                                        47,231 (206100-17175) X25%
C Units of Production Method
Cost of New Machine                                     206,100
Annual Depreciation= Depreciable Value X(Actual usage during the year/Estimated Hours)
Depreciable Value = Original cost – Scrap value
Depreciable Value = 206100-29700=176400
Annual Depreciation=176400 X( 1820/36000) 8918
D A Cost of Truck(Excluding GST)                                        22,000 (24200/1.1)
B Salvage Value                                          2,200
C Useful life                                                  6 Years
D=(A-B)/C Depreciaton P a                                          3,300
E=D X 5 Depreciation for 5year                                        16,500
F=A-E Written Down Value                                          5,500
Loss on Scrapping of truck                                         5,500

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