1.Entity A is a listed company in Hong Kong that hires out motor trucks to its part-time drivers to generate revenue.

The draft accounts at the end of the reporting period of31 December 2017included the motor trucks which were bought on1 January 2015.

The economic life of the motor trucks is6 years.These motor trucks were purchased from Entity B on credit.The listed price was$9,859,375.Entity B always provides a trade discount of4.00%to Entity A due to its good business relationship.Under the contract, it will be settled by cheque on15 January 2015and15 March 2015by two payments of60.00%and40.00%respectively.EntityA is also responsible for disposing of these motor trucks to the scrap yard for recycling after6 years.The removal cost of$106,600will be incurred on31 December 2020.The delivery cost of$25,028was incurred on1 January 2015by paying a cheque to Entity C.

On31 December 2017, due to the world trade war, Entity A expected the market would move downward starting from1 January 2018.On one hand, Entity A estimated that it was able to generate cash inflows of$1,560,000, $1,200,000 and $3,100,200in the Year2018, 2019 and 2020respectively.It will then be scrapped on31 December 2020.On the other hand, these motor trucks could be sold immediately on31 December 2017for$4,600,000and selling costs of$45,600were also incurred.

On 31 December 2018, Entity A expected the market would move upward again because quite a lot of positive news of the world trade war were observed recently.Entity A estimated that it was able to generate$1,805,000 and $4,400,000cash in the Year2019 and 2020respectively.It will then be scrapped on31 December 2020.Furthermore, these motor trucks could be sold immediately on31 December 2018for$5,600,000and selling costs of$49,600were also incurred.

On31 December 2019, Entity A estimates no further impairment loss should be charged.

Due to a shortage of cash, on30 June 2020, Entity A sold these motor trucks to Entity D which is an independent third party.Entity D paid the agreed price of$750,000by a post-dated cheque of1 July 2020on30 June 2020.Entity A deposited the cheque on2 July 2020.

Entity A adopts a straight-line method for depreciation of motor trucks as the corporate accounting policy.Discount rates are9.75%, 12.00% and 10.00%for applying on1 January 2015, 31 December 2017 and 31 December 2018respectively.

The end of the reporting period is 31 December.

REQUIRED:

According to relevant accounting standards, prepare journal entries to recognise the transactions of Entity A from1 January 2015 to 2 July 2020.

ACCOUNTS FOR INPUT:

| Plant | Motor trucks | Machine | Land | Building | Bank | Payable | Receivable | No entry |

| Retained earnings|Other income |Other expense |Interest expense | Interest revenue |

| Depreciation |Accum. depreciation | Impairment loss | Reversal of impairment loss |

| Restoration liability |Loss on disposal |Gain on disposal | Revaluation surplus | Revaluation deficit |

ANSWERS:

Journal Entries: