The Machine Grinding Company sold the machine for £40,000 at the start of Year 4 and replaced it with a new machine costing £100,000. The new machine had an estimated useful life of 8 years and an estimated residual value of £10,000 at the end of that period. Use of the new machine led to a reduction of wages and running costs to a level of £13,000 a year.

Required:

(a) Prepare a spreadsheet for Year 4, analysing the transactions and events of the company. 

(b) Prepare a statement of financial position (balance sheet) at the end of Year 4 and an income statement (profit and loss account) for that year.

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Year 4 1 Jan The Machine Grinding Company: replacement machine Transaction or event Amounts brought forward at start of year Machine at cost Assets Accumulated depreciation of van Cash Ownership interest Capital contributed or withdrawn Revenue or gain (expense or loss)