A. Remax Ltd acquires a new piece of machinery for the following amounts:

Initial price paid to the supplier $85000

Cost to deliver the machine to the site $5500

Amount to paint the company name on the machine $2200

Amount paid to an engineer to fit the machine ready for work $37400

Insurance cover taken out on the machine $2200

Repairs made to replace bolts which had dislodged during transit $1050

The machine was estimated to have a useful life of 10 years or 100,000 hours.

Required:

(i) Calculate the value of the machine for depreciation purposes (ignore GST). Explain your reasons

for including or excluding certain items in the calculation;

(ii) Choose a method of depreciation taking into consideration the impact of each available method

on yearly profits;

(iii) Discuss when and why you might consider revaluing this asset.

(8 Marks)

B. Foxes Pty Ltd has a small fleet of delivery trucks. Each one is depreciated on the reducing

balance method (rate 25%). Truck 2 was purchased on the 1st July 2012 for $108000 (GST

excluded) financed by a loan payable. Residual value was estimated at $12000 and useful life

8 years. On 30th June, 2014 repairs costing $8500 (GST excluded) were made to Truck 2 after

an accident. It was sold on 31st March, 2016 for $44000 (GST included). On 1st May 2016

Truck 3 was purchased at a cost of $121000 (including GST). The company paid $20000 in

cash and took a Loan Payable for the balance. The companys financial year ends on 30th June

each year.

(i) Make journal entries to record the transactions above for Trucks 2 and 3 to 30th June, 2016.

(ii) If the accountants at Foxes decides to change to the straight line method of depreciation what

would be the depreciation charges for Truck 2 at years ended 2013 until disposal.

(iii) If revenue was $212,000 for 30th June, 2015, calculate the difference of the two depreciation

methods on the companys Profits for 2015. Ignore tax effects.

(14 marks)