Question
On January 1, 2011, Cabrammatta Ltd purchased two identical new trucks at a total cost of $500,000 (i.e., $250,000 per truck) plus GST. It was
On January 1, 2011, Cabrammatta Ltd purchased two identical new trucks at a total cost of $500,000 (i.e., $250,000 per truck) plus GST. It was estimated that the trucks would have a useful life of eight years and a residual value of $100,000 each. Cabramatta Ltd uses the straight-line method of depreciation for all its property, plant and equipment. The company's end of reporting period is December 31.
Abridged Chart of Accounts
Accumulated Depreciation - TrucksGST Payable
Cash at BankGST Receivable
Carrying Amount of Truck Sold Proceeds from Sale of Truck
Depreciation ExpenseTrucks
Gain on Revaluation - Trucks
Complete the the specified journals (A to D) you must use appropriate account titles from those provided in the abridged chart of accounts above.
A.
Please record in the general journal the purchase of the trucks on January 1, 2011
B.
Please record in the general journal the depreciation expense on the trucks for financial year, 2016.
C.
Assume that on January 1, 2017 the company revalued the trucks upwards by $50,000 each and assessed that the trucks would last four more years instead of two, but they would still have the same residual value. Please record all journal entries for the trucks in 2017.
D.
Please make the necessary entries to record the sale of one of the trucks on December 31, 2017. The trucks sold for $120,000 GST. (Assume that the two trucks had the same carrying amount, which equalled their fair values at this date.)
E.
How much depreciation expense would be recorded on the second truck during 2021 if its estimated residual value were still $100,000?
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