Deduhin Ltd acquired two new machines for cash on 1 January 2014. The cost of machine A was $400 000, and of machine B, $600 000. Each machine was expected to have a useful life of 10 years, and residual values were estimated at $20 000 for machine A and $50 000 for machine B.
Because of technological advances, Deduhin Ltd decided to replace machine A. It traded in machine A on 31 March 2018 for a new machine, C, which cost $420 000. A $200 000 trade-in was allowed for machine A, and the balance of machine C’s cost was paid in cash. Machine C was expected to have a useful life of 8 years and a residual value of $20 000.

On 2 July 2018, extensive repairs were carried out on machine B for $66 000 cash. Deduhin Ltd expected these repairs to extend machine B’s useful life by 4 years and it revised machine B’s estimated residual value to $19 500. Machine B was eventually sold on 1 April 2020 for $300000 cash.

Deduhin Ltd uses the straight-line depreciation method, recording depreciation to the nearest whole month. The end of the reporting period is 30 June.

Required

1.    Prepare general journal entries to record the above transactions and depreciation journal entries required at the end of each reporting period up to 30 June 2020.

2.    Prepare the following ledger accounts for the period 1 January 2014 to 1 July 2020:

•    Machinery

•    Accumulated Depreciation – Machinery