Reference no: EM132967458

On 1 July 2019, Sage Ltd. purchased land $400,000 and buildings $250,000 paying $200,000 cash with the balance being financed by a bank loan. The estimated useful life of the buildings was 40 years, with a $20,000 residual value. On 1 October 2019, machinery was purchased on credit from Allied Machinery Ltd at a cost of $117,000 and installing and assembling the machine amounted to $3,024. The useful life of the machinery is 4 years with an estimated residual value of $9,000. Sage Ltd. uses straight-line depreciation. The entity's balance date is 30 June.

Required:

Problem (A) Prepare the general journal entries to record the purchase of land, buildings and machinery during the year. Prepare general journal entries to record depreciation expense for the year ended 30 June 2020. (Ignore narrations)

Problem (B) On 30 June 2020 the entity conducted an impairment test on the buildings. The fair value was assessed at $240,000 with costs to sell estimated to be $30,000. Value in use was estimated at $230,000. Present the impairment test and prepare the general journal entry (if required).

Problem (C) On 1 July 2020 the entity revalued the land to $500,000. Prepare the general journal entry for this revaluation.

Problem (D) On 31 December 2020, owing to a change of product mix the machinery was sold for $80,000. Prepare the general journal entry (ies) to dispose of the machinery.