On 2 January 2019, Johnston Ltd purchased a machine with a list price of $234 300 and

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On 2 January 2019, Johnston Ltd purchased a machine with a list price of $234 300 and credit terms of 2/10, n/30. Payment was made within the discount period. Freight costs of $5400 and installation costs of $5280 were also paid. The machine has a useful life of 4 years and a residual value at the end of its useful life of $24 000. Ignore GST.

Required

(a) Determine the amount that should be debited to the machinery account and prepare a general journal entry to record the purchase, assuming a financial year ending 31 December.

(b) Determine the amount of depreciation expense for each of the 4 years ending 31 December assuming use of:

i. the straight‐line depreciation method 

ii. the diminishing balance method of depreciation.

(c) Prepare a journal entry to record depreciation expense for the year ending 31 December 2019 under the diminishing balance method.

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Related Book For  book-img-for-question

Financial Accounting

ISBN: 9780730363217

10th Edition

Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie, Andreas Hellmann, Jodie Maxfield

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