Questions $3(34$ Marks$)$

Part I $(18$ marks$)$

Swindall Industries purchased a machine on $3$ April $2022$ at a cost of $$936,000.$ The estimated useful

life of this machine was ten years and estimated residual value was $$48,000.$ The management

estimates that the machine can produce $600,000$ units of products during the useful life. Workings

are required for the answers below.

$($a$)$ Compute the depreciation expense of the machine at the year$-$end on $31$ December for $2022$

and $2023$ by using the methods below $($round your answers to nearest dollar$)$:

$($i$)$ Straight$-$line $($with depreciation calculated to the nearest whole month$),$

$($ii$)200\%-$declining$-$balance $($with half$-$year convention$),$

$($iii$)$ Unit$-$of$-$output $($number of products produced: $60,000$ in $2022$; $70,000$ in $2023).$

$($i$)$ Straight$-$line

Method

$($ii$)200\%-$decliningbalance Method

$($iii$)$ Units$-$of$-$output

Method

Year Depreciation expense Depreciation expense Depreciation

expense

$2022$

$2023$

$(18$ marks$)$

Part II $(16$ marks$)$

On $2$ June $2022,$ Hills Hardware Ltd$.$ purchased an equipment for $$250,000$ with an estimated useful

of $5$ years and an estimated residual value $$16,000.$ On $31$ May $2023,$ the Company sold the

equipment for $$190,000$ cash. The Company uses straight$-$line depreciation method with half$-$year

convention and adjusts its accounts annually with the year$-$end on $31$ December. Prepare the

following journal entries $($show your workings$)$:

Required:

$($a$)$ Prepare the journal entries to update the deprecation for $2023.(4$ marks$)$

$($b$)$ Prepare the journal entry to dispose the said equipment. $(8$ marks$)$

$($c$)$ If the Company did not sell the equipment during $2023$ but install a powerful engine cost

$$78,650$ on $1$ January $2023$ to increase the useful life of the equipment from $5$ years to $7$ years

with the same residual value, what is the new depreciation expense for $2023?(4$ marks$)$