Reference no: EM132467691

(A) On 1 January 2018, Shiny Limited purchased a van at a cost of $220,000 by signing a note payable of $140,000. The remaining $80,000 was paid by cash. The van had an estimated residual value of $40,000 and expected to be used for 100,000 miles over its estimated useful life of 10 years.

Required:

Problem (a) Prepare the journal entries to record the purchase of the van on 1 January 2018. Narration is NOT required.

Problem (b) Compute the depreciation expense for the van for the year ended 31 December 2018, assume

(i) the company uses the straight-line method.

(ii) the company uses the units-of-production method and the usage of the van for the year ended 31 December 2018 is 25,000 miles.

Problem (c) Prepare the journal entry to record the depreciation expense for the year ended 31 December 2018 assuming that the company uses the straight-line method. Narration is NOT required.

(B) Khoo Limited purchased a machine for $640,000 on 1 January 2017 with an estimated residual value of $20,000. It depreciated the machine using the double-declining-balance method. The machine was estimated to have an useful life of 5 years.

Required:

Problem (a) Compute the depreciation expense for the machine for the year ended 31 December 2017 and 2018.

Problem (b) Prepare the statement of financial position to show the net book value of the machine as at 31 December 2017 and 2018.