Reference no: EM133063270

Question - PART A - Pepper Ltd purchased a large machinery with an invoice price of $175,000 on 1 August 2012. Other costs incurred at the time of purchase were as follows:

- Delivery & installation costs, $3,000

- Insurance during delivery, $500

- Initial testing of the machinery, $750

- One-year fire insurance policy covering the machinery, $1,500.

The machinery is estimated to have zero residual value at the end of its 8-year useful life. The machinery was fully depreciated on 31 July 2020. Pepper sold the machinery for $2,000 cash on 1 August 2020.

Required -

1. Determine the acquisition cost of machinery on 1 August 2012.

2. Prepare the general journal entry to record the disposal of the machinery on 1 August 2020.

PART B - On 1 July 2020, ABT Ltd had the following two equity accounts on its Balance sheet:

Share Capital (6,000,000 shares) $30,000,000

Retained Earnings $17,000,000

The following events and transactions relate to ABT Ltd for the financial year ending 30 June 2021.

31/12/2020 ABT Ltd has been operating successfully and the current market price is $12 per share. On 31 December 2020, the company declared a 5% share dividend and $12 was the value assigned to the shares.

The share dividend was distributed in January 2021.

20/01/2021 Issued the shares for the share dividend.

30/06/2021 For the financial year ending 30 June 2021, ABT Ltd recorded a profit after income tax of $15,000,000. On 30 June 2021, $2,000,000 was transferred from Retained Earnings to General Reserve to provide for future business expansion.

30/06/2021 Declared a final cash dividend of 30 cents per share.

Required -

1. Prepare the general journal entries relating to the share dividend on 31/12/2020 and 20/01/2021.

2. Prepare the Equity section of the Balance Sheet of ABT Ltd as at 30 June 2021.