Brennan has been in business for many years, and her accounting year end is the 31 December each year.

On the 1st July 20X5 she purchased a machine for €2,400. The estimated useful life on this machine is five years, with an estimated residual value of €300. Brennan provides for depreciation on a monthly basis using the straight-line method. Brennan then sold the machine on the 1st of April 20X7 for €1,800.

 Show the effect of the above transactions in the relevant accounts and on the financial statements for each year.

Answer rating: 100% (QA)

Year 20X5 Purchase of the machine Debit Machine Fixed Asset 2400 Credit CashBank or Accounts Payable ... View the full answer