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(a) Firming Ltd purchased machinery on 2 January 2019, at a cost of $880 000 including GST. The machinery is depreciated using the straight-line method
(a) Firming Ltd purchased machinery on 2 January 2019, at a cost of $880 000 including GST. The machinery is depreciated using the straight-line method over a useful life of 8 years with a residual value of $88 000 including GST. On 3 January 2022, an overhaul of the machinery was made at a cost of $123 200 including GST. After this overhaul , the useful life was re-estimated at 4 years from 3 January 2022, and the residual value was amended to $44 000 including GST. The carrying amount of parts replaced was considered to be $11 000 including GST. Required Assuming the financial year ends on 31 December, prepare journal entries to record: i. the purchase of the machinery on 2 January 2019. (3 marks) ii. depreciation expense for 2019, 2020 and 2021. (6 marks) the overhaul expenditure on 3 January 2022. (6 marks) iv. depreciation expense for 2022. (3 marks) iii. (b) State and define the two different types of theories in accounting? Illustrate your answer with one example for each theory. (7 Marks)
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