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What is depreciation expense for the old machine

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Question - Brama Limited acquired a machine on July 1, 2018 for $110,500. Installation costs for the machine was $7,000. On July 1, 2019, in order to reduce operating costs, a custom extension was added to the machine resulting in an expenditure to the company of $15,200.  The original residual value was $12,500.  Due to the extension, the residual value has been changed to $18,650. Also, total estimated useful life has been changed from total life of 12 years to total life of 14 years.

On May 1, 2020, Brama Limited purchased a new machine with a market value of $116,000. As part of this acquisition, the company traded in its old machine (which had a fair value of $105,500) and paid $10,750 in cash.

Assume a December 31 year end.  The company uses IFRS.

Required - Answer the next three questions using the above information.  Round all answers to the Dollar.

1. What is the new Depreciation Expense per year calculated on July 1, 2019 due to the changes and the new custom extension?

2. What is depreciation expense for the old machine for year ended December 31, 2018, for year ended December 31, 2019 and for 2020 up to March 1, 2020?

At December 31, 2018:

At December 31, 2019:

From Jan 1, 2020 to March 1, 2020:

3. Record the journal entry to record the exchange of assets transaction on May 1, 2020 (Assume there is commercial substance).

Reference no: EM133077494

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