Question
On the 2 January 2016, Nivea Ltd purchased, by exchanging $267,000 cash and a $160,000, 12%, 18 month finance company loan, assets with the following
On the 2 January 2016, Nivea Ltd purchased, by exchanging $267,000 cash and a $160,000, 12%, 18 month finance company loan, assets with the following independently determined appraised values:
Appraised value | ||
Building | $320,000 | |
Land | 80,000 | |
Machinery and equipment | 100,000 | |
$500,000 |
The estimated useful life of the building is 30 years and its residual value is $18,000. The $100,000 machinery and equipment amount consists of three machines independently valued at $29,000 each and some office equipment valued at $13,000. The estimated useful lives and residual values for these assets are:
Useful life | Residual value | |||
Machine 1 | 6 years | $3,600 | ||
Machine 2 | 9 years | 3,600 | ||
Machine 3 | 4 years | 4,800 | ||
Office equipment | 5 years | 400 |
Nivea Ltd uses the straight-line depreciation method. Ignore GST
Prepare journal entries (in general journal form) to record the following.
a) The purchase of the assets.
b) The accrual of interest expense on the loan on 31 December 2018.
C) Depreciation expense for the year 2018.
D) The payment of the loan on 2 July 2019.
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