Gibbs Ltd operates a manufacturing facility to produce its key products. On 1 July 2019, the balance of an equipment account was as follows: 

During the 2020 financial year, Gibbs Ltd made the following expenditures: 

The equipment has an expected useful life of 20 years, and residual value is $7200. Gibbs Ltd depreciates equipment on a straight-line basis. 

1. What is the journal entry that was made on 30 June 2018 for depreciation on manufacturing equipment? 

2. Indicate the effects of the two expenditures during 2020 on assets, liabilities and shareholders’ equity. 

3. Give the journal entries to record the two expenditures during the 2020 financial year.

Transcribed Image Text:

Manufacturing equipment Accumulated depreciation $120 000 $ 78 000