Printbooks Pty Ltd commenced business on 1 July 2023. On 5 July 2023 it spent \($200\) 000 on industrial printing and binding machinery, payable in two equal instalments on 1 August and 1 November 2023. They incurred \($5\) 000 in transport costs to deliver the machinery to the business premises and a further \($4\) 500 in electrical wiring and installation before the machinery could be used for production. These expenses were paid in cash. The supplier informed management the machinery has a productive capacity of 800 000 hours. It is estimated the residual value would be \($10\) 000 in scrap metal at the end of the machinery’s useful life.

On 30 August 2023, the business purchased a second-hand truck for \($55\) 000 for deliveries. Stamp duty amounted to \($2\) 200. Four new tyres were fitted at a cost of \($2\) 800 to be roadworthy conditions and a signwriter was paid to wrap the business logo across the truck body at a cost of \($2\) 500. The business completing the signwriting currently has a backlog of work and could not complete the signwriting until 1 October. The truck will be used for deliveries until the signwriting can be completed. The truck was expected to have a useful life of 5 years and a residual value of \($5\) 000.

On 1 March 2027, the truck’s head gasket blew causing the engine to seize. A new engine was purchased at a cost of \($18\) 000 which was installed for \($3\) 000. The old engine was estimated to have a carrying amount of \($3\) 500 on this date. Management believes the new engine this will provide an additional 4 more years to the existing life of the truck. The residual value remains unchanged.

The company has adopted the units of production method of depreciation for the printing and binding machinery and diminishing balance method for the truck. The end of its reporting period is 30 June. Ignore GST.

Required

(a) Prepare general journal entries to record the transactions and to record depreciation adjustments necessary for the year ended 30 June 2024 if production totalled 80 000 hours. Show narrations and all workings.

(b) Justify the value you recognised as the cost of the second-hand truck purchased on 30 August 2023 by reference to the requirements of IAS 16/AASB 116.

(c) Prepare the journal entries to record the new engine and identify the cost to be recorded for the value of the truck in the financial statements for 30 June 2027.