On 1 January 2012, Carrier plc bought a machine for 36,600. The machines useful life was estimated to be three years, with a residual value of 600. Depreciation was provided on a straight-line basis. At 1 February 2013, the machine was sold for 23,000.

The company replaced the machine on 28 February 2013 with a more modern version, one which cost 50,000. Carrier plc decided to depreciate the new machine on a reducing balance basis, using a rate of 70% per annum. The machines useful life was estimated to be three years, with a residual value of 1,500.

It is the company policy to depreciate machinery for a full year in the year of purchase irrespective of which month of the year the asset was purchased, and not in the year of disposal. The companys year-end for reporting purposes is 31 May.

Required

Prepare T accounts for machinery cost and accumulated depreciation separately for each machine.

Also, prepare T accounts relating to machinery for cash, and for profit and loss, for both years ended 31 May 2013 and 31 May 2014.

Balance off the T accounts for the machinery cost and accumulated depreciation accounts. Show clearly your workings in which you calculate depreciation and the gain or loss on disposal.