Kent Morgan is the Managing Director of Hot Pies Ltd, a producer of meat pies and sausage
Question:
Kent Morgan is the Managing Director of Hot Pies Ltd, a producer of meat pies and sausage rolls. Kent has recently purchased a delivery van to distribute the pies and sausage rolls to bakeries in Melbourne. You are the newly appointed accountant of Hot Pies Ltd. Kent emails you with the following information:
‘The company purchased the delivery van on 1 August 20x6 at a cost of $55,000 (GST inclusive). Our first delivery using the van occurred on 1 September 20x6. We expect the van to have a useful life of 12 years, which equates to about 200,000 kilometers, after which we should be able to sell it for $3,500. During the early years, the van will be used for short trips around Melbourne, but once our business expands we expect the van to be used quite often to travel throughout Victoria. For example, in the first year, the van only traveled 5,000 kilometers but in the second year, this increased to 10,000 kilometers. As the accountant, I am providing this information to help us calculate depreciation on the delivery van using the most appropriate methods.’
REQUIRED
Prepare to adjust entries to record depreciation as of 30 June 20x7 and 30 June 20x8 under the straight-line, reducing-balance and units of production methods. For the reducing-balance method, assume a depreciation rate of 30%.
Managerial Accounting A Focus on Ethical Decision Making
ISBN: 978-0324663853
5th edition
Authors: Steve Jackson, Roby Sawyers, Greg Jenkins