Question

Journal entries

The Research & Development Department of Large Mart is currently working on the development of a “study pillow” that allows students to upload study material into their brain whilst sleeping. In order to complete this project, Large Mart has purchased the following items:

• A minibus (which is used to transport students participating in a trial of the study pillow to the laboratory)

• A video camera (which is used to record the feedback of students participating in the trial)

The minibus was purchased on credit on 10th April 201x. The list price of the minibus was $90,000, but Large Mart received a 10% loyalty discount because the company purchases all of its motor vehicles from this car dealer. The car dealer also charged $2,000 to deliver the minibus to the Large Mart Research & Development Department.

Large Mart received the minibus on 12th April, and Large Mart started to use the minibus on that day. The invoice (for the purchase price as well as the delivery charges) from the car dealer was paid on 1st May 201x and Large Mart received an early payment discount of 5% when the payment was made.

Large Mart expects to use the minibus for a period of 5 years. At the end of its useful life, the minibus is expected to have a residual value of $8,000. The depreciation method used for the minibus is identical to the method that Large Mart is using for other motor vehicles (straight-line depreciation).

On 1st July 201x, the accounting department of Large Mart decides to revalue the minibus to its fair value at that time of $75,000.

The video camera was purchased in a cash transaction on 1st May 201x. Large Mart paid a total of $3,000 for the camera. After unpacking the camera on 2nd May 201x, Large Mart noticed that the camera was broken. Large Mart returned the camera to the supplier and the supplier has promised to return the funds that were originally paid by Large Mart to Large Mart’s bank account on the following day.

Required:

1) (0.5 marks) – Provide all journal entries that are necessary in the books of Large Mart to account for the purchase of the video camera on 1st May 201x as well as the return of the camera to the supplier on 2nd May 201x.

2) (1 mark) – Provide all journal entries that are necessary in the books of Large Mart to account for the purchase of the minibus as well as its payment.

3) (1.5 marks) – Provide all journal entries that are necessary in the books of Large Mart to account for the revaluation of the minibus on 1st July 201x.

Please help me to solve this question. It's very urgent.

Answer 1