Question 3:

The following transactions appeared in the accounting records of GT during the year. Stella comes to your office and wants to understand how we should be entering these into the accounting system for the December 31 year-end. Please summarize these transactions using the metric below (i.e. show how the change in Assets, Liabilities or Shareholder Equity should be shown). Show your calculations.

1. On January 1, GT purchased a mining machine from Japan. The machine cost CAN$1,350,000 and had to be shipped to Vancouver. Once it arrived in Vancouver, there were customs duties of CAN$50,000 levied on the purchase. The machine and its unassembled components were placed on a train to be transported, and assembled on a job site (far, far away - probably north). The cost of the freight was CAN$10,000, and a friendly mechanic named Mitch assembled the machine components once it arrived at its destination. GT paid Mitch $2,000. (8 marks)

1. One week into the machine operating, a cable on the mining machine snapped, and Mitch had to replace it. Mitch recommended that we get a better cable that can lift more weight. It would make the machines capacity to lift way better Mitch said. The new cable cost $12,000. (3 Marks)

1. GT employs a double declining method depreciation, assuming a salvage value of 15,000, and 6 year life. Stella wants to know what to book for depreciation for the year. (8 marks)

1. On March 31 the next year, a competitor firm to GT offered to buy the mining machine for $2,000,000. GT took the offer and sold the machine on the same day. Assume for the purpose of this point only that accumulated depreciation on this asset at the time of sale was $200,000. Stella wants to know how to account for the sale. (8 marks).

1. GT currently has $2,000,000 in its receivables on its books. Last year Stella booked $100,000 on the AFDA account. This year, you estimate that 3.5% of receivables are uncollectible. Stella wants to know what to book this year (4 marks).

1. After making the adjustment in point 5, Stella finds out that one of the accounts is uncollectible. They owe GT $65,000. Please help Stella with the adjustment (2 marks).

Assets	Liabilities	Shareholder Equity