Thank you for your phone call this morning. As agreed, I am emailing you regarding the...

 

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Thank you for your phone call this morning. As agreed, I am emailing you regarding the two following accounting issues (listed below). As I do not have any accounting experience, please explain the principles and concepts for me in simple language. In order to assist our management team in the decision-making process, could you please make sure you reference any relevant sources relating to your advice, for example, AASBS, Corporations Act, and relevant websites? Issue 1 On 1 December 2020, Shine Ltd places an order for a machine from a company in Philippines. The machinery is delivered on 1 January 2021 and the invoice price is $350,000 with a trade discount of 2%. The invoice was paid on 31st January. Import duties and taxes amounted to $11,000. The following costs are also additionally incurred. Details $ Delivery and transport costs from Sydney port to the factory 3,500 Installation and commissioning costs 19,500 Administrative costs incurred in processing and inspection 4,000 Start-up and pre-production costs 10,000 Exchange translation loss of payable 7,000 General administrative costs allocated 18,500 Shine Ltd depreciates machinery using a straight-line method over 10 years based on historical cost with no residual value. After the 10th year, it is required to dismantle the machinery at the cost of $5,000. As at 30 June 2021, management decided to adopt the fair valuation model and an independent professional valuer places a valuation of $470,000 for the machinery. During June 2023, the machinery was revalued by reference to a price index. Based on revised estimates, the new fair value of the machinery is valued at $220,000. On 1 September, 2023 Shine Ltd sold the machine for $240,000. Please clearly advise inclusion or exclusion of the above costs in the asset cost price with relevant AASB and explanations. In addition, show journal entries from the acquisition of the machine (from the year ending 2021) to disposal date (1st Sep 2023). Thank you for your phone call this morning. As agreed, I am emailing you regarding the two following accounting issues (listed below). As I do not have any accounting experience, please explain the principles and concepts for me in simple language. In order to assist our management team in the decision-making process, could you please make sure you reference any relevant sources relating to your advice, for example, AASBS, Corporations Act, and relevant websites? Issue 1 On 1 December 2020, Shine Ltd places an order for a machine from a company in Philippines. The machinery is delivered on 1 January 2021 and the invoice price is $350,000 with a trade discount of 2%. The invoice was paid on 31st January. Import duties and taxes amounted to $11,000. The following costs are also additionally incurred. Details $ Delivery and transport costs from Sydney port to the factory 3,500 Installation and commissioning costs 19,500 Administrative costs incurred in processing and inspection 4,000 Start-up and pre-production costs 10,000 Exchange translation loss of payable 7,000 General administrative costs allocated 18,500 Shine Ltd depreciates machinery using a straight-line method over 10 years based on historical cost with no residual value. After the 10th year, it is required to dismantle the machinery at the cost of $5,000. As at 30 June 2021, management decided to adopt the fair valuation model and an independent professional valuer places a valuation of $470,000 for the machinery. During June 2023, the machinery was revalued by reference to a price index. Based on revised estimates, the new fair value of the machinery is valued at $220,000. On 1 September, 2023 Shine Ltd sold the machine for $240,000. Please clearly advise inclusion or exclusion of the above costs in the asset cost price with relevant AASB and explanations. In addition, show journal entries from the acquisition of the machine (from the year ending 2021) to disposal date (1st Sep 2023).