QUESTION 31 NON-CURRENT ASSETS 30 MARKS

Lomani Ltd acquired two new machines for cash on 1 January 2017. The cost of

machine A was $400 000, plus GST, and of machine B, $600 000, plus GST. Each

machine was expected to have a useful life of 10 years, and residual values were

estimated at $20 000 for machine A and $50 000 for machine B.

Because of technological advances, Lomani Ltd decided to replace machine A. It

traded in machine A on 31 March 2021 for a new machine, C, which cost $420 000.

A $200 000, plus GST, trade-in was allowed for machine A, and the balance of

machine C's cost was paid in cash. Machine C was expected to have a useful life of

8 years and a residual value of $20 000.

On 2 July 2021, extensive repairs were carried out on machine B for $66 000 cash.

Lomani Ltd expected these repairs to extend machine B's useful life by 4 years and

it revised machine B's estimated residual value to $19 500. Machine B was

eventually sold on 1 April 2023 for $300 000, plus GST, cash.

On 1 July 2023, Lomani Ltd decided to use the revaluation model for valuation of

Machine C. The fair value of Machine C was assessed to be $220 000 and the future

useful life was estimated to be 5 years, residual value remains the same.

Lomani Ltd uses the straight-line depreciation method, recording depreciation to

the nearest whole month. The end of the reporting period is 30 June.

Required:

Prepare general journal entries to record the above transactions and depreciation journal

entries required at the end of each reporting period up to 30 June 2024.