Scenario/Context: ACA Construction Ltd, purchased a bench planer (Asset No. 346) from Mullum Machinery on 1st July 2014 that cost $18,000. It is expected to produce 5,000 items during its life in the workshop. At the end its scrap value will be $1,000.

The machine has been operating for two years. Its production in each of those years has been 800 and 1000 units respectively. It is being depreciated on the units of production method. Balance day is 30 June each year.

Also, on 1st July 2014, ACA Construction Ltd purchased a standing drill (Asset No. 348) from Danny's Drills. It cost $5,000 and will be used daily in the Workshop for a variety of purposes. The equipment has a useful life of 4 years and a residual value of $800. The straight-line deprecation method is used for this asset.

ACA Construction Ltd bought a delivery truck on 1/7/2015. It cost $33,000 (including GST), and it was decided to depreciate it at 30%. At the end of the financial year, on 30/06/2016, the balance of the accumulated depreciation of the truck was $15,300. The truck was traded in on a new one On 31/03/2017 Andrew traded it in on a new delivery truck. He received $8,800 for the trade in, and he paid the balance, $44,000, in cash. All figures included GST. Andrew's Slabs uses the diminishing balance method.

Complete the following activities:

TASK 1.1 Prepare journal entries according to standard practice to record the purchase of assets, depreciation expense and accumulated depreciation for the years ended 30 June 2016 and 2017. Show your workings for the depreciation calculation. Record these Journal entries as part of a Word or Excel document. Include the words Journal Entries in the document's name.

Journal entries for the year ended 30 June 2014

Date

Accounts

DR$

CR$

30/06

Equipment

18,000

30/06

To account payable

18,000

[To record the purchase of bench planer (Asset No. 346)]

30/06

Equipment

5,000

30/06

To account payable

5,000

[To record the purchase of a standing drill (Asset No. 348)]

30/06

Depreciation expenses

2720

30/06

To accumulated depreciation

2720

[To record the depreciation for bench planer (Asset No. 346)]

30/06

Depreciation expenses

1050

30/06

To accumulated expenses

1050

[To record the depreciation for standing drill (Asset No. 348)]

Workings for the depreciation calculation

Bench planer (Asset No. 346): unit of production method

Depreciable amount = original cost - residual value = $18,000 - $1,000 = $17,000

Year 1 (2016 - 2017) depreciation expense = (800 / 5,000) x $17,000 = $2,720

Year 2 (2017 - 2018) depreciation expense = (1,000 / 5,000) x $17,000 = $3,400

standing drill (Asset No. 348): straight-line method

Depreciable amount = original cost - residual value = $5,000 - $800 = $4,200

Year 1 (2016 - 2017) depreciation expense = $4,200 / 4 = $1,050

Year 2 (2017 - 2018) depreciation expense = $4,200 / 4 = $1,050