Reference no: EM132998159
You are required to account for each of the following INDEPENDENT scenarios provided below:
1. On 1 October 2019, Picador Ltd purchased machinery was purchased at a total cost of $120,000 paying $86,000 cash with the balance on account. Picador uses the straight-line method of depreciation. The machinery is estimated to have a useful life of 4 years with an estimated residual value of $10,000. Picador Ltd has a 30 June year-end. On 31 December 2020, owing to a change of product mix the machinery was sold for $80,000. (Show workings)
2. MBC Ltd's accounting records reported land at cost $270,000. MBC Ltd has a 30 June year-end. On 1 July 2019, the land was revalued to its fair value of $300,000. Following a downturn in property, on 1 July 2020, the land was revalued to $260,000. (Show workings)
3. Blair Ltd's accounts include Buildings as a non-current asset. The Building cost $555,000 and Accumulated Depreciation to 30 June 2020 was $255,000. Depreciation is calculated on the straight-line basis. The Building has 20 years useful life remaining and an expected residual value of $75.000. Blair Ltd is concerned that the Building may have suffered structural damage due to a flood in 2020 On 31 December 2020, it was determined that the Building had a fair value of $280,000 with costs to sell estimated to be $15,000 and a value in use of $250,000. (Show workings)
Problem ?a) Prepare journal entries (in general journal format) to reflect the information provided in each of the independent scenarios above. Ignore narrations and GST.
Problem b) Distinguish between expenses and capital expenditures during a non-current asset's useful life.
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