Rawsons Recycling Ltd commenced business on 31 March 2015 in the recycling industry. The company balances its
Question:
Rawsons’ Recycling Ltd commenced business on 31 March 2015 in the recycling industry. The company balances its accounting records at month-end and the end of its reporting period is 31 December. Ignore GST.
The following events occurred during 2015 and 2016:
2015 April 1 June 30 Aug. 31 Dec. 31 | Paid $140 000 cash for a second-hand disposal truck. Paid $1500 cash to recondition the truck’s engine. Paid $12 000 cash for equipment. The company estimated the equipment’s useful life at 10 years and residual value at $1500. Paid $600 cash for the truck’s transmission repairs and oil change. Recorded depreciation on the truck at 40% p.a. on the diminishing balance, and on the equipment using the straight-line method. | |
2016 Mar. 13 July 1 Dec. 31 | Paid $600 cash to replace a damaged bumper bar on the truck. Installed a new motor in the truck for a cost of $11000. The company considered that the carrying amount of the old motor was only $600 at this date, and the old motor was written off. With the new motor installed, the truck’s depreciation rate using the diminishing-balance method was revised to 30% from 1 July. Recorded depreciation on the truck and on the equipment. |
Required
A. Prepare journal entries to record the events.
B. Prepare the following ledger accounts for the period 31 March 2015 to 31 December 2016.
- Truck
- Equipment
- Accumulated depreciation – truck
- Accumulated depreciation – equipment
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett