Reference no: EM132531084
On 30th June, 2017 Utensilite Ltd had the following Motor Vehicle assets: Vehicle Number Purchase Date Cost Estimated Life Residual Value Depreciation Method Accumulated Depreciation to 30/6/17 1 1/01/2016 42,000 10 years 2,000 Straight Line 6,000 2 1/07/2015 50,000 10 years 5,000 Straight Line 9,000 On 1st July 2017 Utensilite Ltd acquired a 3rd Motor Vehicle for $45,000 paying cash of $12,500 and negotiating a loan for the balance. The estimated life of the vehicle was 12 years and residual value $3,000. The vehicle was to be depreciated at the rate of 30% using the declining balance method. Depreciation is recorded on 30th June each year. On 30th September, 2017 and 30th September, 2018 all three vehicles were serviced at a cost of $5,400. On 31st March, 2019 Vehicle No 1 is sold to Extratta Traders because for $8,000.
You are required to:
Question a. Prepare an extract from the Balance Sheet dated 30th June, 2017 to show the Motor Vehicles account;
Question b. Record all the journal entries that took place from 1st July 2017 to 30th June 2019 (ignore GST and show all calculations).
Question c. If revenue for the financial year 2018 was $61,500, prepare an extract from the Profit and Loss Statement at 30th June 2018 indicating associated expenses for motor vehicles for the year.
Question d. Prepare an extract from the Balance Sheet dated 30th June, 2019 to show the Motor Vehicles account.
Question e. Why would Utensilite choose the two methods of depreciation it has? What is the impact of each method on Profit figures over the life of the asset? Describe two other depreciation methods that could have been used to depreciate the motor vehicles. Which of the four methods do you believe is most appropriate for motor vehicles and why?
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