A. On 1 July 2018, the company purchased a new equipment costing RM1,650,000 to replace the old

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A. On 1 July 2018, the company purchased a new equipment costing RM1,650,000 to replace the old equipment that was purchased in July 2014 at a cost of RM1,220,000. The old equipment was trade-in for RM885,000. The transaction on 1 July 2018 has not yet recorded. Plant and machinery is depreciated over their useful life of 10 years. The depreciation expenses are classified as administrative expenses.

The policy of the company is to depreciate all its assets using the straight line method on yearly basis, giving full year’s depreciation in the year of purchase and none in the year of disposal.

B. A plant which was purchased on 1 July 2012 at a cost of RM1,340,000 had a reduction in production capacity since September 2018. This had caused several breakdowns during the production process. The board of directors of Laguna Bhd therefore decided to provide impairment on the plant as at year end. The fair value of the plant as at 30 June 2019 is RM350,000 and if it disposed, the company has to incur a dismantling cost of RM12,400. No record has been made to account the impairment loss.

Based on the additional information no. A and B, prepare the journal entries and the extract of financials.