Reference no: EM132791281

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 $10,000 in cash. They also paid $750 in cash for freight costs for the new machine.

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

Required - Answer the next three questions using the above information.

1. What is the new Depreciation calculation on July 1, 2019? Show all your work.

2. What is depreciation expense for old machine in 2018, 2019, and 2020?

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