Reference no: EM132367074

Computer Lab Exercise question

On 15 March 2018, Mythical Pty Ltd purchased two items of equipment, in cash, that wcrc to be installed and tested in the company factory.

The following costs were incurred in this process;

	Equipment A $	Equipment B $
Purchase Price	98,500	85,700
Installation and testing cost	4,500	2,100
Salary of employees installing and testing the equipment	2,200	1,700
Damage to the factory wall while installing the equipment	800	500
Repair of the component of the equipment in the process of testing	1,700

The company accountant decided to determine depreciation charges for the assets based on different depreciation methods. The following details are provided by the accountant;

	Equipment A	Equipment B
Useful Life	8	80,000 hours
Residual Value	53,800	52,500
Depreciation Method	Diminishing balance	Units of production

Use of equipment type B was 5,000 hours by 30 June 2018.

Required:

a) Calculate the initial cost to be recorded for each type of equipment.

b) Prepare the appropriate journal entries to record all costs incurrcd on 15 March 2018.

c) Calculate the depreciation expense for the two types of equipment for the year ended 2018 and 2019. Assume that the end of financial year is 30 June (Show all workings).