Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 3 (20 marks) (A) On 1 January 2017, Kidal Limited purchased a machine at a cost of $350,000 by signing a note payable of

image text in transcribed

Question 3 (20 marks) (A) On 1 January 2017, Kidal Limited purchased a machine at a cost of $350,000 by signing a note payable of $300,000. The remaining $50,000 was paid by cash. The useful life of the machine was estimated to be 5 years with a residual value of $50,000. The machine was expected to produce 200,000 units of products over its 5-year useful life. For the years 2017 and 2018, the machine had produced 50,000 units and 80,000 units of products respectively. The accounting year of Kidal Limited ends on 31 December. Required: (a) If Kidal Limited used the units-of-production method of depreciation, (i) prepare journal entries to record the purchase of the machine on 1 January 2017 and the depreciation expense of the machine for the year 2017. (Note: Narrations are not required.) (5 marks) (ii) compute the depreciation expense of the machine for the year 2018. (2 marks) (b) If Kidal Limited used the double-declining-balance method of depreciation, (i) compute the depreciation expense of the machine for the years 2017 and 2018. (3 marks) (ii) prepare the statement of financial position (extracts) to show the carrying amount of the machine as at 31 December 2018. (3 marks) (B) On 1 January 2018, Leo Limited purchased a motor vehicle for $140,000. It had been depreciated using the straight-line method based on an estimated residual value of $20,000 and an estimated useful life of 5 years. On 31 July 2019, the motor vehicle was sold for $90,000 cash. The accounting year of Leo Limited ends on 31 December. Required: (a) Compute the depreciation expense of the motor vehicle for the year 2018. (2 marks) (b) Compute the depreciation expense of the motor vehicle for the year 2019 up to the date of disposal on 31 July 2019. (1 mark) (c) Prepare journal entry to record the disposal of the motor vehicle on 31 July 2019. (Note: Narration is not required.) (4 marks) [Total marks for Question 3: 20 marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Advances In Behavioral Research

Authors: Lawrence A. Ponemon, David R.L. Gabhart

1st Edition

0387976191, 978-0387976198

More Books

Students also viewed these Accounting questions