Limo Ltd is a leading manufacturer of laboratory items and lab reagents. As part of its renovation, the company has obtained a bank loan of USD 25 million on January 1st, 2010, to finance the replacement of old machinery and equipment with state-of-the-art facilities. The following transactions were undertaken for the period ended December 31st, 2020:

1. January 2020: Old machinery that had been bought in 2016 for USD 3 million was sold for USD 2 million. A new replacement machine was acquired at a cost of USD 4 million.

2. April 2020: Air conditioning equipment purchased for USD 2 million at the time with the machinery was disposed of since it was no longer of useful value. It was replaced at a cost of USD 2.5 million.

3. July 2020: The company disposed of freehold land for USD 15 million, which had been acquired in 2018 for USD 1.2 million. Instead, the company bought a 50-year leasehold piece of land in a prime area for USD 30 million. This is intended to facilitate future expansion.

4. October 2020: The company previously had only one distribution van bought in 2018 for USD 1.8 million. This was disposed of at USD 800,000 and 2 new vans bought at USD 1.7 million each.

5. December 2020: Owing to a change in technology, computer accessories bought in 2016 for USD 3.5 million were considered obsolete and discarded. These were replaced with new accessories at a cost of USD 11 million.

More information:

1. Depreciation of assets is calculated using the straight-line method at the following rates: Motor vehicles - 18% Equipment - 20% Machinery - 22% Computers - 24%
2. Full depreciation is charged in the year of purchase and depreciation in the year of disposal.

Required: Prepare extracts of the ledgers for the period ending December 31st, 2020.

a) Assets account (10 Marks)

b) Depreciation Account (6 Marks)

c) Disposal Account (4 Marks)

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a Assets Account Date Particulars Debit ... View the full answer