On 30 June 2021, Giant Ltd purchased an equipment with a list price of $134,734 and credit terms of 2/10, n/30. Freight costs of $3,105 and installation costs of $3,036 were also paid on the same day.

Giant Ltd also has a machinery that was purchased at a cost of 220,000 on 1 July 2019. The machine was estimated with a useful life of 10 years and a residual value of 11,000 at the end of its useful life.

Giant Ltds financial year ends on 30 June each year. Ignore GST.

Required

1. Record the purchase of the equipment on 30 June 2021.
2. Determine the amount of accumulated depreciation for the machine at the end of 30 June 2021, assuming use of:

i. the straight-line depreciation method

ii. Diminishing balance method (depreciation rate is 25%)

3. On 1 July 2021, the machine was sold for $190,000. Record the transaction assuming straight-line method has been used.
4. Discuss the nature of depreciation.