Solution-Calculate the depreciation expense for the year

Calculate the depreciation expense for the year ending

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Reference no: EM133090724

Question - On 15 January 2020, Shibu Ltd purchased second-hand equipment for $94,270 (GST Inclusive) in cash to manufacture a new product for sale overseas. On the same day Shibu Ltd installed the equipment and paid an installation cost of $2,310 (GST Inclusive). The estimated useful life of the equipment is 6 years, with a residual value of $5,100. According to the technical consultant, the equipment is expected to have a running life of 250,000 hours.

To maintain the same level of economic benefits from the equipment, Shibu Ltd pays $2,200 (GST Inclusive) each year for maintenance costs. (GST RATE = 10%)

Required -

1. Prepare the required journal entries for:

-The initial purchase on 15 January 2020 (include the calculation for initial cost of the equipment),

-The annual maintenance cost of $2,200

2. Calculate the depreciation expense for the year ending 30 June 2022, using the following methods:

-Diminishing balance method

-Units of production, assuming the equipment was used for 57,500 hours for the year ending 30 June 2022.

Reference no: EM133090724

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Calculate the depreciation expense for the year ending

Reference no: EM133090724

Reference no: EM133090724

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