Reference no: EM132996072
Question - Colin Clark Pty Ltd has an accounting financial year which ends on 31 December. The company purchased an equipment on 30 June 2019 for $ 216,000 cash which is expected to produce 15,000 cups during its useful life of three years. The company has a schedule of producing 6,000, 4,000, and 5000 cups each year since its acquisition. The residual value of the equipment is expected to be $ 27,000 after the useful life.
Required -
(A) Prepare the journal entry to record the purchase of equipment on 30 June 2019.
(B) Assuming straight-line method, calculate the depreciation rate and depreciation expenses for the financial year 2019 and 2020, respectively.
(C) Assuming diminishing-balance method, calculate the depreciation rate and depreciation expenses for the financial year 2019 and 2020, respectively.
(D) Assuming units of production method, calculate the depreciation expenses for the financial year 2019 and 2020, respectively.
(E) Assuming diminishing-balance method, prepare the adjusting journal entry to record depreciation expense for the financial year 2019.
(F) On 31 December 2020, Colin Clark Pty Ltd sells the equipment on cash for $ 98,000. Assuming diminishing-balance method, prepare the journal entry to record the disposal of asset.
Note:
-If you believe no journal entry is required, explain the reason(s).
-Ignore the effect of GST.
-Narrations are not required for journal entries.
-Colin Clark Pty Ltd's chart of accounts includes these accounts - Cash, Inventory,
-Equipment, Accumulated depreciation, Accounts payable, Salaries payable, Sales Revenue, Gain on sale, Loss on sale, Depreciation expense, and Salaries expense.
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