Question $2$: Disposal of Property, Plant and Equipment $(21$ marks$)$

Isayra runs a metals manufacturing business called$/$sayra$\text{'}$s Ingots. $10$ years ago, on January

$1,$ she bought a heating pit. It had an expected useful life of $13$ years and an expected

salvage value of $$500.$ She calculates depreciation to the nearest month. The heating pit

appeared on Isayra's balance sheet on December ${31}^{\text{'}\text{'}},2023($after adjustments$)$ as follows:

Isayra uses the straight$-$line depreciation method to calculate depreciation and has calculated

the annual depreciation rate to be $$1,500.$ On May $1,2023,$ Isayra decided to scrap the heating

pit.

Instructions:

Before the heating pit is disposed of$,$ the business must first update depreciation $($all

scenarios$).$ Provide the journal entry for this update. $(3$ marks$)$

a$)$ Record the disposal of the heating pit if Isayra were to simply scrap it$.(5$ marks$)$

b$)$ Record the disposal of the heating pit if Isayra were to receive $$3,000$ from the sale.

$(5$ marks$)$

c$)$ Record the disposal of the heating pit if Isayra were to receive $$6,000$ from the sale.

$(5$ marks$)$

d$)$ Record the disposal of the heating pit if Isayra were to trade it in for a new heating pit.

The supplier offered her a trade$-$in allowance of $$3,000$ and she will have to pay the

remainder in cash. The list price of the new heating pit is $$25,000.$ Isayra had

calculated the fair$-$value of her current heating pit to be $$2,800.(6$ marks$)$