On 1 July 2018, Terry’s Tools purchased a new delivery van. The van was purchased forcash of $66 000 (GST inclusive). Additional costs associated with the purchase of the van were stamp duty of $6 600 (GST exempt) and registration of $1 100 (GST exempt). Both were paid with cash. The company chooses to use the units of production method of accounting for depreciation. The financial year ends on 30 June. The van is expected to have a useful life of 700 000 kilometres and a residual value of $6 000.

The following events and transactions occurred over the following 3 years. Transactions are GST inclusive.

2018-2019

July 8Paid $3 300 (GST inclusive) for signwriting on the van.

Jun 30Recorded the annual depreciation. The van travelled 150 000 kilometres in the first year.

2019-2020

Aug 2Paid $990 (GST inclusive) for a service and an oil change.

Jun 30Recorded the annual depreciation. The van travelled 180 000 kilometres inthe second year.

2020-2021

Jul 1The mechanic discovered an engine problem in the van. This required an overhaul of the engine that cost $9 900 (GST inclusive). This was paid with cash. This overhaul of the van is expected to extend the useful life by 200 000 kilometres.

Jun 30Recorded the annual depreciation. The van travelled 90 000 kilometres in the third year.

Required:

Prepare the general journal entries to record the purchase of the van and the above transactions. You are not required to complete narrations or posting references, however, you should show workings for depreciation calculations. Use the Excel template provided.

Answer rating: 100% (QA)

As Per Question Given on 1 st July 2018 Terrys Tools purchased a new delivery van The Van was Purchased for cash of 66000 including GST Further Additi... View the full answer