no videos

Tutorial Q13 Part 1 On 1 July 2016, Holiday Lodge Limited purchased a motel building situated on a 10 acres piece of land in Lake District. Hamilton. The total purchase price of land and building was. $5,400,000. The fair value of land at the time of the purchase was $1,400,000. Holiday Lodge Limited incurred the following costs related to the land and building for the year ended 31" December 2016: 80,000 450,000 15,000 Furniture & Fittings purchased on 1 July 2016 Electric Generator purchased on 1 July 2016 Demolition and removal of an old shed Construction of extension to existing building structure Legal fees and stamp duty for transfer of legal title of land Site clearance 68,000 18,000 25,000 Landscaping $2,000 Local authority fees for planning approval 7,000 A long-term bank loan with a fixed interest rate of 10% per annum was obtained from BNZ Bank to pay for the acquisition cost of land, building, furniture and fittings and electric generator. Interest charges on the bank loan were calculated and paid on a monthly basis. All other costs were paid from the company's BNZ cheque account (current account). The motel commenced operations on 1 January 2017. The company depreciates non-current assets on the following basis: Land No depreciation Building Straight-line at 2% per annum on cost Furniture and Fittings Reducing balance basis at 10% per annum Electric generator Hours used basis The estimated total capacity of the electric generator is 90,000 hours. For the year ended 31 December 2017 the company operated the generator for 4,500 hours. Required: (2) Prepare general journal entries (without narrations) to record all costs incurred during the year ended 31": December 2016. (b) Compute and prepare journal entries for the depreciation charges for each type of the non-current asset for the year ended 31 December 2017. Assume that the company commenced depreciation from 1 January 2017. (a) Prepare general journal entries (without narrations) to record all costs inc during the year ended 31" December 2016. Debit Credic Date Account Details 1/7/2016 Building (a) Prepare general journal entries (without narrations) to record all costs incurred during the year ended 31" December 2016. Date Account Details Debit Credit 1/7/2016 Building Land Electric Generator Furniture and Fittings Bank Loan Land (Demolition and removal shed Building (Construction of extension) Land (Legal fees and stamp duty) Land (Site clearance) Land (Landscaping) Building (Local authorities fees) Bank Building Land Furniture and Fittings Electric Generator Bank (b) Compute and prepare journal entries for the depreciation charges for each type of the non-current asset for the year ended 31 December 2017. Assume that the company commenced depreciation from 1 January 2017. Building Capitalised cost= Depreciation for year ended 31 December 2017 = Dr Dep. Cr Acc Dep. Furniture and Fittings total capitalised cost= Depreciation for 31 December 2017 = Dr Dep. Cr Acc Dep. Electric Generator capitalised cost- Depreciation for 31" December 2017- Dr Dep. Cr Acc Dep. Part 2 On 1 April 2010, Thames Limited purchased the 2A model of a machine to process bricks in its factory in Huntly. The list price of the machine was $2,000,000 and Thames Limited was given a special discount of 10% on the purchase. The company paid $500,000 of this amount and took a loan for the balance. The loan was paid promptly on the due date 30 Part 2 On 1 April 2010, Thames Limited purchased the 2A model of a machine to process bricks in its factory in Huntly. The list price of the machine was $2,000,000 and Thames Limited was given a special discount of 10% on the purchase. The company paid $500,000 of this amount and took a loan for the balance. The loan was paid promptly on the due date 30 September 2010 along with accrued interest charges of $60,000 of which $20,000 was for the period 1 August 2010 - 30th September 2010. Delivery charges for the machine totalled $2,000. A contractor was paid $18,000 to install the machine in the factory. The maintenance cost of the machine for the first year of operation amounted to $5,000. The maintenance cost was paid on 12th January 2011. The use of the machine commenced on 31 July 2010. The company has a policy of depreciating the machine on the basis of machine hours used. When the machine was purchased it was initially assessed as having a life of 80,000 hours. During the financial year ended 31" December 2010, the machine operated for 24,000 hours. As at 31 December 2010 the value-in use of the machine was $1,200,000 and the net sales price was $500,000. In January 2011 the machine was upgraded at a cost of $240,000. Management believes that this upgrade will add a further 20,000 hours of operating time to the life span of the machine. During the financial year ended 31 December 2011 the machine operated for 30,000 hours. As at 31" December 2011 the value-in use of the machine was $1,100,000 and the net sales price was $450,000. On 20th January 2012 the company purchased a new model 3A of the machine and traded in the existing 2A model for $600,000. The purchase price of the new 3A model was $3,500,000. The balance of the purchase price of the new 3A model was settled by a bank loan. As at 20th January 2012 the company has used 60,000 hours of the existing 2A model. Required: (a) Prepare journal entries (without narrations) to record the acquisition and maintenance costs incurred for the year ended 31" December 2010. (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (e) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (e) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (4) Prepare journal entries (without narrations) to record the cost of the major upgrade of the 2A model machine during the year ended 31 December 2011 (1 mark) (e) Prepare journal entries (without narrations) to record the disposal of the 2A model and purchase of the new 3A model machine on 20th January 2012. (a) Prepare journal entries (without narrations) to record the acquisition and maintenance costs incurred for the year ended 31" December 2010. (a) Debit SCredit S Machine Bank Machine Loan Interest Loan Bank Delivery Charges Bank Installation Bank Maintenance Accrued maintenance Machine Interest Delivery Charges Installation (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. Date Cost Life Span Usage Accumulated (Hours) Depreciation for the year depreciation 31/12/2010 1,860,000 80,000 24,000 31/12/2011 240.000 20.000 30.000 2.100,000 100.000 $4,000 (c) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31" December 2011. Bank Delivery Charges Hank Installation Bank Maintenance Accrued maintenance Machine interest Delivery Charges Installation (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. Date Cost LifeSpan Usage Accumulated Depreciation for the year (Hours) depreciation 31/12/2010 1.860,000 80,000 24,000 31/12/2011 240.000 20.000 30.000 2.100.000 100.000 54.000 (c) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years. ended 31 December 2010 and 31 December 2011. De Depreciation expense Accumulated depreciation De Depreciation expense Accumulated depreciation (d) Prepare journal entries (without narrations) to record the cost of the major upgrade of the 2A model machine during the year ended 31" December 2011 De Machine Kank (e) Prepare journal entries (without narrations) to record the disposal of the 2A model and purchase of the new 3A model machine on 20 January 2012. Accumulated Depreciation 60/100 x 2.100,000 Disposal of machine Disposal of machine Machine Machine Disposal Loss on disposal Disposal of machine Tutorial Q13 Part 1 On 1 July 2016, Holiday Lodge Limited purchased a motel building situated on a 10 acres piece of land in Lake District. Hamilton. The total purchase price of land and building was. $5,400,000. The fair value of land at the time of the purchase was $1,400,000. Holiday Lodge Limited incurred the following costs related to the land and building for the year ended 31" December 2016: 80,000 450,000 15,000 Furniture & Fittings purchased on 1 July 2016 Electric Generator purchased on 1 July 2016 Demolition and removal of an old shed Construction of extension to existing building structure Legal fees and stamp duty for transfer of legal title of land Site clearance 68,000 18,000 25,000 Landscaping $2,000 Local authority fees for planning approval 7,000 A long-term bank loan with a fixed interest rate of 10% per annum was obtained from BNZ Bank to pay for the acquisition cost of land, building, furniture and fittings and electric generator. Interest charges on the bank loan were calculated and paid on a monthly basis. All other costs were paid from the company's BNZ cheque account (current account). The motel commenced operations on 1 January 2017. The company depreciates non-current assets on the following basis: Land No depreciation Building Straight-line at 2% per annum on cost Furniture and Fittings Reducing balance basis at 10% per annum Electric generator Hours used basis The estimated total capacity of the electric generator is 90,000 hours. For the year ended 31 December 2017 the company operated the generator for 4,500 hours. Required: (2) Prepare general journal entries (without narrations) to record all costs incurred during the year ended 31": December 2016. (b) Compute and prepare journal entries for the depreciation charges for each type of the non-current asset for the year ended 31 December 2017. Assume that the company commenced depreciation from 1 January 2017. (a) Prepare general journal entries (without narrations) to record all costs inc during the year ended 31" December 2016. Debit Credic Date Account Details 1/7/2016 Building (a) Prepare general journal entries (without narrations) to record all costs incurred during the year ended 31" December 2016. Date Account Details Debit Credit 1/7/2016 Building Land Electric Generator Furniture and Fittings Bank Loan Land (Demolition and removal shed Building (Construction of extension) Land (Legal fees and stamp duty) Land (Site clearance) Land (Landscaping) Building (Local authorities fees) Bank Building Land Furniture and Fittings Electric Generator Bank (b) Compute and prepare journal entries for the depreciation charges for each type of the non-current asset for the year ended 31 December 2017. Assume that the company commenced depreciation from 1 January 2017. Building Capitalised cost= Depreciation for year ended 31 December 2017 = Dr Dep. Cr Acc Dep. Furniture and Fittings total capitalised cost= Depreciation for 31 December 2017 = Dr Dep. Cr Acc Dep. Electric Generator capitalised cost- Depreciation for 31" December 2017- Dr Dep. Cr Acc Dep. Part 2 On 1 April 2010, Thames Limited purchased the 2A model of a machine to process bricks in its factory in Huntly. The list price of the machine was $2,000,000 and Thames Limited was given a special discount of 10% on the purchase. The company paid $500,000 of this amount and took a loan for the balance. The loan was paid promptly on the due date 30 Part 2 On 1 April 2010, Thames Limited purchased the 2A model of a machine to process bricks in its factory in Huntly. The list price of the machine was $2,000,000 and Thames Limited was given a special discount of 10% on the purchase. The company paid $500,000 of this amount and took a loan for the balance. The loan was paid promptly on the due date 30 September 2010 along with accrued interest charges of $60,000 of which $20,000 was for the period 1 August 2010 - 30th September 2010. Delivery charges for the machine totalled $2,000. A contractor was paid $18,000 to install the machine in the factory. The maintenance cost of the machine for the first year of operation amounted to $5,000. The maintenance cost was paid on 12th January 2011. The use of the machine commenced on 31 July 2010. The company has a policy of depreciating the machine on the basis of machine hours used. When the machine was purchased it was initially assessed as having a life of 80,000 hours. During the financial year ended 31" December 2010, the machine operated for 24,000 hours. As at 31 December 2010 the value-in use of the machine was $1,200,000 and the net sales price was $500,000. In January 2011 the machine was upgraded at a cost of $240,000. Management believes that this upgrade will add a further 20,000 hours of operating time to the life span of the machine. During the financial year ended 31 December 2011 the machine operated for 30,000 hours. As at 31" December 2011 the value-in use of the machine was $1,100,000 and the net sales price was $450,000. On 20th January 2012 the company purchased a new model 3A of the machine and traded in the existing 2A model for $600,000. The purchase price of the new 3A model was $3,500,000. The balance of the purchase price of the new 3A model was settled by a bank loan. As at 20th January 2012 the company has used 60,000 hours of the existing 2A model. Required: (a) Prepare journal entries (without narrations) to record the acquisition and maintenance costs incurred for the year ended 31" December 2010. (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (e) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (e) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. (4) Prepare journal entries (without narrations) to record the cost of the major upgrade of the 2A model machine during the year ended 31 December 2011 (1 mark) (e) Prepare journal entries (without narrations) to record the disposal of the 2A model and purchase of the new 3A model machine on 20th January 2012. (a) Prepare journal entries (without narrations) to record the acquisition and maintenance costs incurred for the year ended 31" December 2010. (a) Debit SCredit S Machine Bank Machine Loan Interest Loan Bank Delivery Charges Bank Installation Bank Maintenance Accrued maintenance Machine Interest Delivery Charges Installation (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. Date Cost Life Span Usage Accumulated (Hours) Depreciation for the year depreciation 31/12/2010 1,860,000 80,000 24,000 31/12/2011 240.000 20.000 30.000 2.100,000 100.000 $4,000 (c) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years ended 31 December 2010 and 31" December 2011. Bank Delivery Charges Hank Installation Bank Maintenance Accrued maintenance Machine interest Delivery Charges Installation (b) Compute the depreciation of the 2A model machine for the years ended 31 December 2010 and 31 December 2011. Date Cost LifeSpan Usage Accumulated Depreciation for the year (Hours) depreciation 31/12/2010 1.860,000 80,000 24,000 31/12/2011 240.000 20.000 30.000 2.100.000 100.000 54.000 (c) Prepare journal entries (without narration) to record depreciation charges of the 2A model machine for the years. ended 31 December 2010 and 31 December 2011. De Depreciation expense Accumulated depreciation De Depreciation expense Accumulated depreciation (d) Prepare journal entries (without narrations) to record the cost of the major upgrade of the 2A model machine during the year ended 31" December 2011 De Machine Kank (e) Prepare journal entries (without narrations) to record the disposal of the 2A model and purchase of the new 3A model machine on 20 January 2012. Accumulated Depreciation 60/100 x 2.100,000 Disposal of machine Disposal of machine Machine Machine Disposal Loss on disposal Disposal of machine