Bruce is the owner of Willis Meat Supplies. Willis Meat Supplies’ adjusted trial

Question

Bruce is the owner of Willis Meat Supplies. Willis Meat Supplies’ adjusted trial balance at 31 December 2016 (end of the reporting period) included the following balances: Processing Plant (at cost; purchased 10 April 2013) $148 650 Accumulated Depreciation – Processing Plant 109 135 Trucks Control (at cost) 291 400 Accumulated Depreciation Control – Trucks 174 200 The Trucks Control and Accumulated Depreciation Control – Trucks accounts are supported by subsidiary ledgers. Details of trucks owned at 31 December 2016 are as follows: Truck Purchase Cost Estimated Estimated Date Useful Life Residual Value 1 25 August 2013 $61 000 4 years $3 400 2 05 March 2014 $70 600 4 years $3 400 3 02 August 2014 $75 600 4 years $3 600 4 23 October 2014 $84 200 5 years $3 200 Additional information Bruce uses the general journal for all entries, calculates depreciation to the nearest month, balances his accounts 6-monthly, and records amounts to the nearest dollar. Bruce uses straight-line depreciation for all depreciable assets except the processing plant, which is depreciated at 30% p.a. on the diminishing balance. The following transactions and events occurred during 2017: January 27 Traded-in Truck 1 for a new truck (Truck 1A) which cost $84 100. A trade- in allowance of $10 200 was received and the balance was paid in cash. Registration and painting costs of $1500 were also paid in cash. Bruce estimated Truck 1A’s useful life and residual value at 5 years and $4600. June 02 Modernised the processing plant at a cash cost of $61 574. Although the modernisation significantly expanded the plant’s operating capability and efficiency, Bruce decided that no revision to the depreciation rate was warranted. July 24 Sold Truck 3 for $25 000 in cash. September 28 Exchanged Truck 2 (fair value at exchange date: $10 640) for computer equipment. The computer equipment’s fair value was $10 550 at exchange date. The computer equipment originally cost $26 600 and had been depreciated in the previous owner’s accounts by $15 850 to date of exchange. Bruce estimated the computer equipment’s useful life and residual value at 4 years and $320. December 31 Recorded depreciation. Required A. Prepare journal entries to record the above transactions and events. (Narrations are not required.) B. Prepare the Processing Plant and Accumulated Depreciation Control – Trucks general ledger accounts for the period 1 January 2017 to 31 December 2017:

Explanation / Answer

Journal Entries Date Particulars Debit Credit 22-Jan-17 Trucks $75,400 Cash $75,400 New Trucks 5 Purchased (84100-10200+1500) 2-Jun-17 Processing Plant $61,574 Cash $61,574 Plant efficieny increased 24-Jul-17 Cash $25,000 Truck 3 $26,100 Loss on Sale $1,100 (Truck 3 sold) 21-Sep-17 Computer equipment $10,550 Truck 2 $10,400 Profit on exchange $150 (Truck 2 exchanged with computer equipment) 31-Dec-17 Depreciation $25,709 Accumulated Depreciation- Processing Plant $25,709 (Depreciation on (148650-109135) @ 30% and on new plant 61574 @ 30 % for 7 months 31-Dec-17 Depreciation $639 Accumulated Depreciation- Computer $639 ( Depreciation on (10550 -320)/4 *3/12 31-Dec-17 Depreciation $60,780 Accumulated Depreciation- Trucks $60,780 (Depreciation on Boat ) Cost of Processing Plant $148,650.00 Less: Accumulated Depreciation as on 31st Dec $19,135.00 Book Value $129,515.00 Depreciation @30% $38,854.50 Depreciation on Trucks Residual Annual Depreciation Depreciation Truck Purchased on Cost Life (in year) Value Depreciation For period For 2017 1 25-Aug-13 $61,000.00 4 $3,400.00 $14,400.00 22 days $867.95 2 5-Mar-14 $70,600.00 4 $3,400.00 $16,800.00 263 days $12,105.21 3 2-Aug-14 $75,600.00 4 $3,600.00 $18,000.00 204 days $10,060.27 4 23-Oct-14 $84,200.00 5 $3,200.00 $16,200.00 Full year $16,200.00 5 22-Jan-17 $85,600.00 5 $4,600.00 $16,200.00 343 days $15,223.56 Total $54,456.99

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