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 date Cost              Estimated useful life Estimated 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

1-Prepare journal entries to record the above transactions and events. (Narrations are not required.)
2-Prepare the Processing Plant and Accumulated Depreciation Control – Trucks general ledger accounts for the period 1 January 2017 to 31 December 2017:

Explanation / Answer

Truck Date of Purchase No of months up to 31.12.2016 Total Estimated Life Cost Residual Value Depreciation WDV Month of Use in 2017 for dep Dep 2017 WDV Exchanged for Loss 1 25.08.2013 40 48 61000 3400 48000 13000 1 1200 11800 10200 -1600 2 05.03.2014 34 48 70600 3400 47600 23000 9 12600 10400 10550 150 3 02.08.2014 29 48 75600 3600 43500 32100 7 10500 21600 25000 3400 4 23.10.2014 26 60 84200 3200 35100 49100 12 16200 32900 1A 27.01.2017 60 85600 4600 85600 11 14850 70750 TOTAL 377000 18200 174200 202800 Computer 1 28.09.2017 48 26600 320 26600 3 1642.5 24957.5 Journal Entries 27.01.2017 Truck 1A A/c      Dr 84100         To Creditor 84100 Creditor A/c     Dr 10200     To Truck 1 10200 Creditor A/c      Dr 73900     To Cash 73900 Truck 1A A/c    Dr 1500     To Cash 1500 (Being Registration & Painting Charges capitalized) Accumulated Dep - Truck A/c Dr 49200 Loss on sale of Truck A/c           Dr 1600                To Truck 1 50800 02.06.2017 Processing Plant A/c   Dr 61574      To Cash A/c 61574 (Being Modernisation expenses capitalised) 24.07.2017 Cash A/c         Dr 25000     To Truck 3 21600     To Gain on sale of Asset 3400 28.09.2017 Computer A/c           Dr 10550        To Truck 2 10400        To Gain on exchange of Truck 2 150 Ledger of Processing Plant Date Particulars Amount Date Particulars Amount 01.01.2017 To Opening Balance 39515 31.12.2017 By Depreciation 30327 02.06.2017 Too Modernisation Expenses 61574 31.12.2017 By balance C/d 70762 101089 101089 01.01.2018 To balance b/d 70762 Ledger of Accumulated Depreciation - Truck A/c Date Particulars Amount Date Particulars Amount 27.01.2017 To Truck 1 49200 01.01.2017 By Opening Balance 174200 24.07.2017 To Truck 3 54000 27.01.2017 By Truck 1 1200 28.09.2017 To Truck 2 60200 24.07.2017 By Truck 3 10500 24.07.2017 By Truck 2 12600 31.12.2017 By Truck 4 16200 31.12.2017 By Closing c/d 66150 31.12.2017 By Truck 1A 14850 229550 229550 01.01.2018 To Balance b/d 66150 Break up of Accumulated Depreciation Cost WDV Dep Truck 4 84200 32900 51300 Truck 1A 85600 70750 14850 66150

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