Reference no: EM132537518

Question 1 - TXA Ltd acquired a machine from Blue Ltd for the following consideration:

Cash $70, 000

Land in the books of TXA Ltd the land is recorded at its cost of $650,000.

It has a fair value of $450,000.

TXA Ltd also agrees to assume the liability of the Blue Ltd bank loan of $89,000 as part of the machine acquisition.

Required -

(a) Calculate the acquisition cost of the machine.

(b) Provide the journal entries that would appear in TXA Ltd.'s books to account for the acquisition of the Machine.

Question 2 - Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost of $61,000. The life of the asset is assessed as being six (6) years, after which time Max Ltd expects to be able to dispose of the asset for $6,000. It is expected that the benefits will be generated in a pattern that is best reflected by the sum-of-digits depreciation approach. On 1 July 2019, owing to unforeseen circumstances, the machinery is exchanged for a motor vehicle. Note the motor vehicle is two years old, originally cost $17,000 and has a fair value of $11,000.

Required - Provide the necessary journal entries for the disposal of the machinery and the acquisition of the motor vehicle on 1 July 2019.