Arnold Ltd purchased machinery for its manufacturing process on 1 January 2018. The machinery cost $137,500. Arnold Ltd estimates that the machinery has a useful life of 6 years and will have a $17,500 residual value.

It is also estimated that the machinery will produce 50,000 units over its useful life. The reporting period ends on 30 June. Ignore GST.

Required:

a. Assuming that in the year ending 30/6/2019 7,500 units were produced, prepare the journal entry to record Depreciation Expense for year ending 30/6/2019 using units of production method. (1 Mark)

b. What is the carrying amount of the machinery at the year ending 30/6/2019 using straight line method of depreciation. (1 Mark)