Exercise 11.25 DEPRECIATION ** Springs Manufacturing, which started operations on 1 September 2010, is owned by Alice Ltd. Alice Ltd's accounts at 31 December 2013 included the following balances: Machinery cat cost Accumulated Depreciation - Machinery Vehicles (at cost; purchased 21 November 2012) Accumulated Depreciation - Vehicles Land (at cost; purchased 25 October 2010 Building at cost; purchased 25 October 2010) Accumulated Depreciation - Building $91000 (48200) 46 800 119656) 81000 185 720 (28614) Details of machines owned at 31 December 2013 are as follows: Machine Useful life Purchase date 7 October 2010 4 February 2011 Cost $43000 $48000 5 years 6 years Residual value $2 500 $3000 Additional information (a) Alice Ltd calculates depreciation to the nearest month and balances the records at month-end. Recorded amounts are rounded to the nearest dollar, and the end of the reporting period is 31 December (b) Alice Ltd uses straight-line depreciation for all depreciable assets except vehicles, which are depreciated on the diminishing balance at 40% p.a. (c) The vehicles account balance reflects the total paid for two identical delivery vehicles, each of which cost $23400 (d) On acquiring the land and building Alice Ltd estimated the building's useful life and residual value at 20 years and $5000 respectively The following transactions occurred from 1 January 2014: 2014 Jan. 3 June 22 Aug. 28 Bought a new machine (Machine 3) for a cash price of $57000. Freight charges of $442 and installation costs of $1758 were paid in cash. The useful life and residual value were estimated at 5 years and $4000 respectively. Bought a second-hand vehicle for $15 200 cash. Repainting costs of $655 and four new tyres costing $345 were paid for in cash. Exchanged Machine 1 for office furniture that had a fair value of $12 500 at the date of exchange. The fair value of Machine 1 at the date of exchange was $11 500. The office furniture originally cost $36000 and, to the date of exchange, had been depreciated by $24 100 in the previous owner's books. Alice Lid estimated the office fumiture's useful life and residual value at 8 years and $540 respectively. Recorded depreciation Dec. 31 2015 April 30 May 25 June 26 Paid for repairs and maintenance on the machinery at a cash cost of $928. Sold one of the vehicles bought on 21 November 2012 for $6600 cash. Installed a fence around the property at a cash cost of $5500. The fence has an estimated useful life of 10 years and zero residual value. (Debit the cost to a land improvements asset account. Recorded depreciation. Dec. 31 4 PART 2 Elements 2016 June 20 Traded in the remaining vehicle bought on 21 November 2012 for a new vehicle. A trade in allowance of $3700 was received and $22000 was paid in cash. Stamp duty of $500 and registration and third-party insurance of $800 were also paid for in cash. Dec. 31 Recorded depreciation Required Prepare general journal entries to record the above transactions
