Depreciation

Harry Bigg runs a courier services business. He has made the following purchases of capital assets for his business. Calculate the amount for depreciation for the assets for their useful life.

• Purchase of a new forklift on July 1, 2008 for the business costing $60,000 (including GST). The expected residual value of the asset is $20,000 when you dispose of it after four years. The business is using straight line depreciation method for this asset.

• Computers with a capitalised cost of $8,800 (including GST) were purchased on 1 July 2007. The assets has a life expectancy of four years and is to be depreciated using the reducing-balance method.

Robert Logan, Chartered Accountant

Prepare Adjusting Entries for the month ended 30 April, 2009

(a) Robert Logan was hired on 15 April by Bourke constructions to perform services on a monthly basis. Under this agreement, Bourke will pay Logan $750 monthly, with the first payment on15 May. During April Logan will earn half a month's fee.

(b) Robert Logan prepaid 3 months rent on 1 April, after negotiating a lease for his business office. The lease specifies monthly rental amounts of $1 100.

(c) Logan's furniture, which was purchased on 1 April for $15000, is expected to have a useful life of 5 years, and be virtually worthless at the end of its life.

(d) Robert Logan pays his employee a monthly salary of $3 000, half on the 15th and half on the last day of the month. If the pay day falls on the weekend, Logan pays the employee on the following Monday. Because the final pay day of the month of April (30th) falls on a Saturday, the second half-month's salary will be paid on Monday, 2 May.