Exercise 11.26 DEPRECIATION Chorin Lid started operations on 1 October 2010. Its accounts at 30 June 2013 included the following balances: Machinery (at cost) Accumulated Depreciation - Machinery Vehicles (at cost; purchased 20 February 2011) Accumulated Depreciation - Vehicles Land (at cost; purchased 20 March 2013) Building (at cost; purchased 20 March 2013) Accumulated Depreciation - Building Land Improvements (at cost; purchased 20 March 2013) Accumulated Depreciation - Land Improvements $98 000 (47 886) 160 000 (89 440) 75 000 290 600 (3 420) 18000 (300) Details of machines owned at 30 June 2013 were: Machine Cost Useful life Residual value Purchase date 2 October 2010 27 December 2010 29 July 2011 $25 000 42 000 31000 4 years 5 years 4 years $2 500 4000 3 000 3 Additional information (a) Chorin 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 30 June (b) Chorin Ltd uses straight-line depreciation for all depreciable assets except vehicles, which are depreci- ated on the diminishing balance at 30% p.a. (c) The Vehicles account balance reflects the total paid for four identical delivery vehicles, which cost $40 000 each () On acquiring the land and building, Chorin Ltd estimated the building's useful life and residual value at 20 years and $17000 respectively. (e) The Land Improvements account balance reflects a payment of $18000 made on 20 March 2013 for driveways and a car park. On acquiring these land improvements, Chorin Ltd estimated their useful life at 15 years with no residual value. The following transactions occurred from 1 July 2013: 2013 Aug. 3 Nov. 15 Dec. 30 Purchased a new machine (Machine 4) for a cash price of $36000. Installation costs of $1800 were also paid. Chorin Ltd estimated the useful life and residual value at 5 years and $3500 respectively. Paid vehicle repairs of $600. Exchanged one of the vehicles for items of fixtures that had a fair value of $17000 at the date of exchange. The fair value of the vehicle at the date of exchange was $16000. The fixtures originally cost $50 000 and had been depreciated by $31000 to the date of exchange in the previous owner's books. Chorin Lid estimated the fixtures' useful life and residual value at 5 years and $2500 respectively. 2014 March 10 June 30 Sold Machine 1 for $5000 cash. Recorded depreciation expense. (continued) CHAPTER 11 Property, plant and equipment 5 Sept. 20 Traded in Machine 3 for a new machine (Machine 5). A trade-in allowance of $10000 was received for Machine 3 and $34000 was paid in cash. Chorin Lid estimated Machine 55 useful life and residual value at 6 years and $5000 respectively. Scrapped Machine 2, as it was surplus to requirements and no buyer could be found for it. Dec. 30 2015 Feb. 8 Paid $8000 to overhaul Machine 4, after which Machine 4's useful life was estimated at 2 remaining years and its residual value was revised to $5000. Recorded depreciation expense. June 30 Required Prepare general joumal entries to record the above transactions