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Determine the amount that machinery should be recorded

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Reference no: EM132533062

On 1 July 2019, LongWaves Ltd purchased an item of machinery for $198,000. The machinery has a useful life of 4 years and a residual value of $30,000. The machinery is to be depreciated on a straight-line basis. The following information relates to the purchase of the machinery:

Cash paid for machinery (includes GST $18,000) $198,000

Costs of transporting machinery $4,000

Labour costs of installation by expert fitter $3,500

Labour costs of testing machinery $2,500

General insurance costs for 2019-2020 $4,500

Costs of training salesmen to market the new product made by this machinery $2,500

Required:

Question 1: Determine the amount that the machinery should be recorded for in the records of LongWaves Ltd at 1 July 2019.

Question 2: Prepare journal entries to record:

a. The cost of the machinery purchased

b. Any additional costs not included in the cost

c. Depreciation expense for machinery for the year ended 30 June 2020.

Reference no: EM132533062

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