At the end of the 2020 financial year, Wendy Ltd identified the following items that need to be resolved before financial statements are prepared. GST has been correctly accounted for on these non-current asset transactions.

1. On 1st July 2019, Wendy Ltd purchased a used machine for $65,000 cash. The cost was debited to the “Machinery” account in the ledger. Prior to use, additional expenses were incurred for installing and testing the machine. These costs amounted to $7,400 and were debited to the “repairs and maintenance expenses” account. The installation and testing was completed on 1st October 2019, and the machine was brought into use on that date. The machine has an estimated useful life of 5 years, with a residual value of $6,000. Wendy uses straight-line depreciation for machinery and records depreciation to the nearest month. No depreciation has yet been provided in respect of this asset in the current year.

2. On 2nd July 2019, a small building and land were purchased for $350,000. The purchase price was determined by appraisers based on a fair value of $250,000 for the land, and $100,000 for the building. The total purchase consideration of $350,000 was debited to the “land” account. The building has an estimated useful life of 10 years with no residual. Wendy uses straight-line depreciation for buildings. No depreciation has yet been provided for the building in the current year. On 1 June 2020, Scallion decided to adopt the revaluation model and to measure its land and buildings at fair value in the balance sheet. A valuation was carried out on 30 June 2020, and the land was valued at $295,000, and the building was valued at $120,000. No entries have yet been passed in relation to these fair values. The fair value of the land and retail store acquired on 2nd June 2020 had not changed.

3. A new truck was purchased on 31st March 2020. wendy Ltd paid cash of $46,100. The truck has an estimated useful life of 4 years with a residual value of $13,300 and is to be depreciated using the reducing balance method (using a rate of 1.5 times the straight-line rate). No depreciation has yet been provided in respect of this asset in the current year. 5

Questions =

Prepare a fully classified profit or loss statement for the year ended 30 June 2020 and a balance sheet at 30 June 2020 showing all assets, liabilities and equity items for Scallion Ltd. Also show how the sales account would appear in the general ledger at the end of the accounting period and the GST paid account (T accounts are preferred).