You have been appointed as the accountant of A&L Manufacturing for the June 20x1 year end. The previous accountant had never accounted for depreciation, thus, resulting in inaccurate financial records.

The financial director, in an attempt to get accurate records for the carrying amounts of the non-current assets, asked that you recalculate the carrying values of these assets.

These assets were owned by A&L Manufacturing:

A Manufacturing machine 1

– This machine was bought on 1 August 19x7 at a cost of R173 000.

– A goods lift was added to the machine at a cost of R27 000 (excluding labour and installation cost).

– The labour cost incurred was R9 000 along with installation costs of R11 000.

– A monthly maintenance cost of R400, was incurred.

– The machine was available for use from 1 October 19x7.

– The machine has an expected useful life of five years with no resale value.

B Manufacturing machine 2

– This machine was bought on 1 July 20x0 after it was decided to expand the business.

– The machine cost R320 000 inclusive of all costs except delivery.

– A delivery cost of R13 000 was incurred and settled in cash.
– The machine was financed with a loan from MANU Bank.

– The machine was available for use from 1 September 20x0.

– The machine has an expected useful life of six years and a residual value of R53 000. 

C. Delivery vehicle

– The business bought a delivery vehicle on 1 October 20x0 to facilitate the expansion programme and was brought into use on the same day.
– The delivery vehicle cost R170 000, for which a 25% deposit was payable in cash, with the remainder being payable in monthly instalments of R10 000. The first instalment is payable on 31 January 20x1.

– A licensing fee of R1 300 was incurred to register the vehicle and was settled in cash.

– The vehicle was available for use on the same day.

– The vehicle has a useful life of five years with a residual value of 20% on the total cost.

You are required to:

1. Record the adjustments in the general journal as at 30 June 20x1.

2. Prepare these general ledger accounts:

a. Machinery.

b. Accumulated depreciation: machinery.

3. Show how depreciation should be shown on the statement of profit or loss & other comprehensive income for the year ended 30 June 20x1.

4. Show how the non-current assets would be shown in the statement of financial position as at 30 June 20x1.