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Part I Ronsdale Company is in the business of producing banners. Its financial year ends on 31 December and it normally adjusts depreciation annually. On
Part I Ronsdale Company is in the business of producing banners. Its financial year ends on 31 December and it normally adjusts depreciation annually. On 5 May, 2019 it purchased a printing machine at $75,000 with an estimated useful life of 3 years and a residual value of $3,000. It is expected that the machine can print a maximum of 150,000 pieces of banners of a standard size. Required: (a) Use the three depreciation methods below and compute depreciation expense of the machine for the years 2019 and 2020 . Show workings. (i) Straight-line method (round to the nearest whole month). (ii) 150% declining balance method (half-year convention). (iii) Unit-of-output method (produced 45,000 pieces in 2019; 60,000 pieces in 2020). (18 marks) (b) What is depreciation expense for the machine in the year 2022 if Ronsdale used method a (ii) to calculate depreciation expense? (2 marks) (c) On 30 April, 2022, Ronsdale sold the above machine for $2,000 cash. Assume the Company used depreciation method (a) (i), prepare journal entries to (i) update depreciation expense in 2022 before disposal of the machine. (2 marks) (ii) record disposal of the machine. (4 marks)
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