On 15 March 2019, Mythical Pty Ltd purchased two items of equipment that were to be...

  

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On 15 March 2019, Mythical Pty Ltd purchased two items of equipment that were to be installed and tested in the company factory for cash. The following costs, GST inclusive, were incurred in this process. Equipment A $ Equipment B $ Purchase Price 108,350 94,270 Installation and testing cost 4,950 2,310 Salary of employees installing and testing the equipment 2,420 1,870 880 550 Payments for the damage to the factory wall while installing the equipment 1,870 Payments for the repair of the component of the equipment in the process of testing The company accountant decided to determine depreciation charges for the assets based on different depreciation methods. The following details are provided by the accountant; Equipment A Equipment B Useful Life 80,000 hours 5 $3,800 Residual Value $2,500 Units of production Depreciation Method Sum-of-the-years'-digits During 2019, Equipment B was idle, and during the year ended 30 June 2020, it was used for 5,000 hours. Required: a) Calculate the initial cost to be recorded for each type of equipment. b) Prepare the appropriate journal entries to record all costs incurred on 15 March 2019. c) Calculate the depreciation expense for the two items of equipment for the year ended 2019 and 2020. Assume that the end of financial year is 30 June. On 15 March 2019, Mythical Pty Ltd purchased two items of equipment that were to be installed and tested in the company factory for cash. The following costs, GST inclusive, were incurred in this process. Equipment A $ Equipment B $ Purchase Price 108,350 94,270 Installation and testing cost 4,950 2,310 Salary of employees installing and testing the equipment 2,420 1,870 880 550 Payments for the damage to the factory wall while installing the equipment 1,870 Payments for the repair of the component of the equipment in the process of testing The company accountant decided to determine depreciation charges for the assets based on different depreciation methods. The following details are provided by the accountant; Equipment A Equipment B Useful Life 80,000 hours 5 $3,800 Residual Value $2,500 Units of production Depreciation Method Sum-of-the-years'-digits During 2019, Equipment B was idle, and during the year ended 30 June 2020, it was used for 5,000 hours. Required: a) Calculate the initial cost to be recorded for each type of equipment. b) Prepare the appropriate journal entries to record all costs incurred on 15 March 2019. c) Calculate the depreciation expense for the two items of equipment for the year ended 2019 and 2020. Assume that the end of financial year is 30 June.

Answer rating: 100% (QA)

Initial cost of equipment Equipment A Equipment B 108350 Purchase Price 94270 Installation and testi... View the full answer