Entity A sells computer accessories in Hong Kong for many years.

For delivery purpose, a motor van is owned by Entity A.  It was bought on 1 January 2016 with an economic life of 8 years and a residual value of $20,000 was estimated.  The purchase price of it was $1,885,000.  An installation cost of $10,000 was incurred before it was ready for use.  A removal cost of $67,221 was estimated and will be paid at the end of its life.  A discount rate of 8.50% was applied on 1 January 2016.

On 1 October 2018, Entity A purchased 240 units of ink-jet printers for $2,500 each by bank payment.

On 1 November 2018, 124 units of ink-jet printers were sold to Entity B for $4,650 each on credit.  It was settled on 30 November 2018.

However, at the end of the reporting period of 2018, the external market was turned down due to several political and financial reasons.  On one hand, the net realisable value (NRV) of the ink-jet printers which still on hand were estimated at $2,250 each.  On the other hand, the motor van was estimated that cash flows of revenue could be generated for $210,000 at each year-end of 2019, 2020, 2021, 2022 and 2023 respectively.  The motor van will then be sold for $13,000 and the cash flow was also received on 31 December 2023.  A discount rate of 15.00% was applied on 31 December 2023.  Alternatively, the motor van could be sold immediately on 31 December 2018 for $690,500 and a selling cost of $5,000 was incurred.

On 1 January 2019, an annual meeting was held for some accounting issues.  The meeting concluded that the remaining useful life and the residual value of the motor van were determined as 5 years and $21,500 respectively.

On 1 July 2019, a major customer, Entity C, purchased 85 units of ink-jet printers on 3-month credit.  The price was $3,850 each.  On 30 September 2019, only 90% of the outstanding amount was settled by a cheque.

On 31 December 2019, the net realizable value (NRV) of the ink-jet printers still on hand was estimated at $2,420.  The recoverable amounts of the motor van on 31 December 2019 and 31 December 2020 were $736,000 and $786,000 respectively.

On 1 January 2020, during the annual meeting, Entity A decided to change the accounting method of depreciation from the straight-line method to the reducing balance method of 25% starting from 2020.

On 15 May 2020, all remaining inventory of ink-jet printers were sold to a new customer, Entity D by a cheque.  The price was $4,500 each.

On 1 January 2021, Entity A sold the delivery van for $710,500 and decided to pay for delivery service from a third-party service provider.

The perpetual inventory system is adopted for inventory.  The end of the reporting period is 31 December for Entity A.

REQUIRED:

According to the relevant HKAS/HKFRS, prepare the journal entries of Entity A on 31 December 2018, 31 December 2019, 31 December 2020 and 1 January 2021.

ACCOUNTS FOR INPUT:

| Motor van | Land | Building | Building under construction | Inventory | Bank | No entry |

| Write-down expense of inventory | Reversal of write-down expense of inventory |

| Payable | Receivable | Other income | Other expense | Interest expense | Interest revenue |

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

| Loss on disposal | Gain on disposal | Removal liability | Retained earnings | Share capital |

ANSWERS:

Journal Entries:

Date	Account Name	Debit ($)	Credit ($)	Hints For Sequence
31-Dec-18				-
				A liability.
31-Dec-18				-
				A Contra Asset.
31-Dec-18				-
				-
31-Dec-18				A Contra Asset.
				-
				-
				-
31-Dec-19				-
				A liability.
31-Dec-19				-
				A Contra Asset.
31-Dec-19				-
				-
31-Dec-19				A Contra Asset.
				-
				-
				-
31-Dec-20				-
				A liability.
31-Dec-20				-
				-
31-Dec-20				-
				-
				-
				-
1-Jan-21				-
				Not an Asset. Judge Dr/Cr. Input the Amount Only.
				-
1-Jan-21