This question has three (3) parts. All parts must be answered.

1. On 1 July 2018, Tank Ltd purchased three machines, each used in a different production process in the factory. On 30 June 2019, there was an indication that the machines could beimpaired due to a new competitor entering the market, so Tank Ltd calculated the recoverable amounts of the machines. Twelve months later this threat no longer existed and the recoverable amount was reassessed. Information concerning the machines is summarised in the following table. Tank Ltd uses straight-line depreciation over a 5-year period for all machinery. Assume that all three machines had nil residual values at the end of their useful lives.

Machine

Cost

1/7/18

Value in use

30/6/19

Net selling price

30/6/19

Value in use

30/6/20

Net selling price

30/6/20

1

$10000

$7500

$9000

$6000

$6500

2

25000

13000

12000

16000

17000

3

15000

13000

11000

9500

9200

50000

Required

1. Prepare the journal entry to record depreciation for the year ended 30 June 2019.
2. Prepare the journal entry to record any asset impairment at 30 June 2019.
3. Prepare the journal entry to record depreciation for the year ended 30 June 2020.
4. Prepare the journal entry to record any asset impairment or reversal at 30 June 2020.

1. Fashion Watches Ltd offers a 12-month guarantee with the watches that it sells. On 1 July 2019, the balance of the warranty provision account was $1200. During the year ended 30 June, warranty claims cost $1500, of which $500 was for parts and $1 000 was for labour. During the same year, revenue from the sale of watches was $14 000, an increase of more than 10% on the previous year. Management estimated that the liability for unexpired warranty contracts at 30 June was $1200. There have been no changes in suppliers, product quality or prices.

Required

1. Prepare a journal entry to record the warranty claims during the year ended 30 June 2020. (Hint: Credit wages payable for the labour costs.)
2. Prepare a journal entry to record the end-of-period adjustment to the warranty provision account.
3. Comment on the appropriateness of the warranty provision at 30 June 2020. Do you think that the provision is adequate? Give reasons for your answer.

1. Range Ltd had the following equity accounts at 1July 2019:

Share capital (200000 shares)

$400000

General reserve

30000

Retained earnings

20000

During the year ended 30June 2020, the following occurred:

1. A profit of $60000 was generated.
2. $8000 was transferred to the general reserve.
3. An interim dividend of 5c per share was declared and paid.
4. A final dividend of 7c per share was declared.

Required

statement of the changes in retained earnings.