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Prepare the journal entry to record all expenditure

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Reference no: EM132918473

Precision Lasers Limited provides laser wood cutting services in Australia. The following transactions relate to the purchase of a new cutting machine. Precision Lasers Limited is registered for GST and the GST rate is 10%.

1 July 2016

On 1 July 2016, a new cutting machine was purchased, delivered and installed. The cutting machine had a recommended retail price of $88,000 (plus GST), but after careful negotiation, it was purchased for $85,000 (plus GST). The company paid $2,750 (including GST) to have the cutting machine delivered and a further $5,500 (including GST) to have the cutting machine installed at the company's factory premises. The cutting machine was purchased on credit, but the delivery and installation charges were all paid in cash. The cutting machine is depreciated using the straight-line depreciation method and has an estimated useful life of 5 years with a residual value of $7,500.

12 Dec 2017

Regular service of the cutting machine was performed at a cost of $2,500 (plus GST).The invoice paid in Cash.

1 July 2018

On 1 July 2018, a special cutting wheel was installed to the cutting machine at a cost of $7,500 (plus GST) to improve the cutting machine's productivity. The invoice paid in Cash. With the installation of the cutting wheel, the company estimates that the residual value of the cutting machine at the end of its useful life will be $12,000, although its estimated useful life remains unchanged.

1 July 2020

The cutting machine was sold for $40,000 (plus GST).

REQUIRED: (Narrations are not required).

Problem a) Prepare the journal entry to record all expenditure (i.e. invoice price of the cutting machine and all related expenditure) on 1 July 2016 in relation to purchase of the machine.

Problem b) Prepare the journal entry to record the service expense on 12 December 2017.

Problem c) Prepare the journal entries to record the installation of the cutting wheel on 1 July 2018.

Problem d) Prepare the journal entry to record the depreciation on the machine for the year ended 30 June 2019.

Problem e) Prepare the journal entry to record the sale of the cutting machine on 1 July 2020.

Reference no: EM132918473

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