Prestige Printing Ltd commenced business on 1 July 2015. On

Prestige Printing Ltd commenced business on 1 July 2015. On 5 July 2015, a printing machine was purchased for $35 000 plus GST, payable in two equal instalments due on 1 August and 1 October 2015. Transport costs of $1200 plus GST were paid in cash to deliver the machine to Prestige Printing Ltd’s premises. The machine was expected to have a useful life of 5 years and a residual value of $3000.

On 22 September 2015, the business purchased a second-hand truck for $26 000 plus GST. Stamp duty amounted to $700 (GST does not apply). The truck dealer also fitted four new tyres at a cost of $1200 plus GST and spray-painted the business logo on the truck doors at a cost of $500 plus GST. All amounts were paid in cash. The truck was expected to have a useful life of 3 years and a residual value of $5000.

On 1 March 2016, extensive repairs were carried out on the printing machine at a cost of $18 230 plus GST, paid in cash. The company expects these repairs to extend the machine’s useful life by 2 years. The residual value was revised to $4000. The carrying amount of the parts replaced in the machine was considered to be equal to $14 000.

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

Required (round all amounts to the nearest dollar)

A. Prepare general journal entries (narrations are not required, but show all workings) to record the transactions and to record depreciation adjustments necessary for the year ended 30 June 2016.

B. Justify the value you recognised as the cost of the second-hand truck purchased on 22 September 2015 by reference to the requirements of IAS 16/AASB 116.

Dealer
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...

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