Timber Merchants Limited supplies fencing materials and landscaping products in Australia. The following transactions relate to a fencing machine that was purchased by the company on 1 July 2017. Timber Merchants Limited is registered for GST and the GST rate is 10%.

1 July 2017

On 1 July 2017, a new fencing machine was purchased for $88,000 (including GST). The fencing machine is depreciated using the straight-line depreciation method and the fencing machine has an estimated useful life of 4 years with a residual value of $4,000.

1 July 2018 1 July 2020

On 1 July 2018, a special digging tool was installed to the fencing machine at a cost of $9,900 (including GST) to improve its productivity. With the installation of the digging tool, the company estimates that the residual value of the fencing machine at the end of its useful life will be $7,000, with no change to its estimated useful life. The fencing machine was sold for $27,500 (including GST).

REQUIRED:

c) Prepare the journal entries to record the installation of the digging tool on 1 July 2018.

d) Prepare the journal entry to record the sale of the fencing machine on 1 July 2020.