Reference no: EM132894106

Espresso Company operates a factory that contains a large number of machines designed to produce knitted garments. These machines are generally depreciated at 10% per annum on a straight-line basis. In general, machines are estimated to have a residual value on disposal of 10% of cost. At July 1, 2018, Espresso Company had a total of 64 machines, and the balance sheer showed a total cost of $4,200,000 and accumulated depreciation of $1,300,000.

During the 2018-2019 period, the following transactions occurred:

1. On September 1, 2018, a new machine was acquired for $150,000. This machine was acquired on July 1, 2015 for $82,000. It was traded in on the new machine, with Espresso Inc. making a cash payment of $88,000 on the new machine. The second replaced machine had a cost of $90,000 on April 1, 2016 and was sold for $73,000.
2. On January 1, 2019, a machine that had cost of $40,000 on July 1, 2016 was retired from use and sold for scrap for $5,000.
3. On January 1, 2019, a machine that had been acquired on January 1, 2016 for $70,000 was repaired because its motor had been damaged from overheating. The motor was replaced at a cost of &48,000. It was expected that this would increase the life of the machine by an extra two years.
4. On April 1, 2019, Espresso Company fitted a new form of atm to a machine used for putting special designs onto garments. The arm cost $12,000. The machine had been acquired on April 1, 2016 for $100,000. The arm can be used on a number of other machines when required and has a 15-year life. It will not be sold when any particular machine is retired, but retained for use on other machines.

The reporting date is June 30.

Problem 1: The accumulated depreciation as of September 1, 2018, of the machine that was acquired on July 1, 2015 amounted to:

a. 23,370
b. 22,140
c. 22,730
d. 23,730

Problem 2: The gain (loss) on the sale of the second replaced machine in (1) on September 1, 2018 amounted to:

a. (800)
b. 2,575
c (2,575)
d. 800

Problem 3: The carrying amount of the machine whose motor was replaced on January 1, 2019 after the replacement is

a. 51,100
b. 118,000
c. 48,000
d. 99,100

Problem 4: The new arm fitted to a machine on April 1, 2019 should be depreciated over

a. 15 years
b. 7 years
c. 0 year
d. 3 years

Problem 5: The depreciation expense on all the machines for the year ending June 30, 2019 would amount to:

a. 376,560
b. 369,030
c. 352,620
d. 367,560