As part of her aim to grow the business Jane has decided to expand her market and
Question:
As part of her aim to grow the business Jane has decided to expand her market and started producing and wholesaling her own range of candles. To do this she has had to purchase various pieces of equipment, one of which is a Packaging machine. The transactions for this piece of equipment are shown below.,
From the information you are required to:
- Prepare a register of property, plant and equipment from the fixed asset transactions (provided below)
- Determine method of calculating depreciation
- Maintain asset register and associated depreciation schedule
- Prepare the general journal entries to record the disposal of the equipment
2020
Jul 1 Purchase of the Packaging Machine from Comco Industries.
- Purchase price $25,000 plus GST
- Delivery $1,200 plus GST
- Installation costs $800 plus GST
- First years Insurance of Equipment $950 plus GST
The equipment – Serial number PAL586349 - came with a 5-year warranty.
Invoice number CC127 for the total amount of $30,745 (incl. GST) is due on the 31st July
Aug 31 Paid Comco Industries for an initial service and re-calibration to ensure the machine was running correctly. $550 including GST
Oct 31 Jane decided to purchase an automatic labelling component (from Comco Industries) to be fitted to the Packaging machine to speed up the overall process. (note the labelling machine is part of the packaging machine)
- Cost of Labelling machine $3,400 plus GST
- Installation $350 plus GST
- Testing $150 plus GST
- Invoice due 30 Nov 2020. Inv # CC501
2021
Mar 31 Maintenance call out to the machine to repair damage caused by incorrect use.
$715 including GST paid to Repairs on the Run.
Jun 30 Depreciation charged on equipment as per policies and procedures found on Canvas
Sept 30 Annual Service by Comco Industries $1,650 including GST
2022
Jun 30 Depreciation charged on equipment as per policies and procedures found on Canvas
Sept 30 Jane has decided to get out of the candle making operations and sold the Packaging and Labelling machine (as a single unit) for $10,450 (including GST)
Listed below are the policies and procedures that must be followed when preparing Financial Reports for Jane’s Design World
Asset Acquisition Procedure is as follows:
Depreciation
Asset Disposal
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Part B: Knowledge questions
- What are the 4 main requirements of AASB116? And what is its objective?
- Refer to AASB 116 which deals with accounting for property plant and equipment and state which section(s) deal with Depreciation methods.
From these sections list the three (3) acceptable methods of calculating depreciation and provide a brief explanation of each of these methods. - With reference to Clause’s 60 and 61 of AASB 116, what does the standard say regarding the choice of depreciation method to be used?
- Provide a brief explanation of the difference between Capital expenditure and Revenue expenditure.
- What is the current Taxation Ruling (name and number) that lists the effective lives of depreciable assets? What is the purpose of this ruling?
Statistics The Art and Science of Learning from Data
ISBN: 978-0321755940
3rd edition
Authors: Alan Agresti, Christine A. Franklin