Calculate the initial cost price at which the machine

Assignment Help Financial Accounting

Reference no: EM133433648

Question

You ordered a machine for your business on 15 October 2020 from American Machines (Pty) Ltd, a supplier situated in the USA.

The following information in relation to the machine purchased has been provided:

• The machine was shipped, FOB shipping point, on 1 November 2020 and the purchase price of $50 000 was paid in full on the same day.

• The shipment arrived in Cape Town harbor on 1 December 2020.

• On 5 December 2020, your business paid R20 000 for transportation fees to have the machine delivered to your factory premises.

• On 13 December 2020, your company paid R15 000 for special services acquired from an engineering company on to install the machine.

• On 2 January 2021, additional equipment had to be purchased to install the machine on the right platform for it to work as initially intended. Your business paid R140 000 for this additional equipment.

• The machine was finally ready to be used on 1 February 2021. •

The following exchange rate data was made available:

Transaction detail Date Rand per 1 Dollar

Order date 15 October 2020 14.70

Shipping / Payment date 01 November 2020 15.10

Harbour arrival date 01 December 2020 17.00

Factory arrival date 05 December 2020 16.50

Ready to be used date 01 February 2021 14.00

Additional information: • Your company's financial year end is 28 February.

• The machine has a residual value of R30 000.

• You are considering applying one of the following depreciation methods for the machine:

~ Option A: Straight line depreciation method of 10% per year.

~ Option B: Diminishing balance depreciation method of 20% per year.

~ Option C: The estimated useful life of the machine can be stated in terms of producing a total of 100 000 units. Of which 1 500 units were produced in the 2021 financial year, and 22 000 units were produced in the 2022 financial year.

To do:

1. Calculate the initial cost price at which the machine should be recognized.

2 Prepare the general journal entries to account for all the transactions that took place from the date that the order was placed on 15 October 2020, up until 1 February 2021.

Include dates when preparing the general journal entries.

3 Assume "Option A" was selected as the preferred depreciation method. Assume that the cost price of the machine is R930 000 and that the machine was ready to be used on 1 February 2021.

Prepare the Accumulated depreciation general ledger account of machinery for the 2021 and 2022 financial years. The account must be closed off at the end of each year.

4 Assume that the cost price of the machine is R930 000 and that the machine was ready to be used on 1 February 2021. Calculated the depreciation for the 2021 and 2022 financial years using:

a) Option B

b) Option C

Reference no: EM133433648

Questions Cloud

What were some challenges in creating your budget : Were you surprised by your expected salary and income after taxes were deducted? Why or why not and What were some challenges in creating your budget

Draw a timeline that details the amount : FIN 320 California State University, Fullerton Draw a timeline that details the amount that would be available for the daughter's college expenses

What strategies team members use to manage-resolve conflict : What strategies did you and your team members use to manage and resolve the conflict? Were these strategies successful? Why or why not?

What extent do you feel the causes of strikes presented : To what extent do you feel the causes of strikes presented in chapter apply to this strike? Can you apply the strike theories to explain why this strike

Calculate the initial cost price at which the machine : Calculate the initial cost price at which the machine should be recognized and Prepare the general journal entries to account for all the transactions

Why amazon first conducted this initial trial phase : Amazon first conducted a trial (or 'pilot') phase in Bengaluru (Bangalore), the capital of India's southern Karnataka state).

What does the market believe that 2-year securities : what does the market believe that 2-year securities will be yielding 4 years from now? Calculate the yield using a geometric average. Do not round your intermed

Draw a diagram that accurately reflects the information : Draw a diagram that accurately reflects the information provided above. b) Suppose the Federal Reserve decided to reduce the discount rate from 7% to 5%

Identify the decision criteria-financial performance : Identify the decision criteria, such as financial performance, customer satisfaction, and employee satisfaction.

User Account

All Pages