uestion 3 (30 marks Kobe Company\'s financial year ends on 31 December. Normally
ID: 2519889 • Letter: U
Question
uestion 3 (30 marks Kobe Company's financial year ends on 31 December. Normally it prepares adjusting entries on depreciation once a vear on 31 December A few years ago, Kobe bought Machine A. On 1 April, 2014 it bought Machine B. Depreciation expense for the first year is based on fractional y ears and rounded to the nearest whole month. Details of Machine A and Machine B as at 31 December, 2014 BEFORE year end adjusting entries are: Asset Residual Estimated Accumulated Depreciation Cost Value ife Method Machine A 90,000 10,000 Machine B 180,000 25,000 72.000 Straight-line Double-declining balance Required (a) When had Kobe probably purchased Machine A? (b) Determine depreciation expense for Machine B from 2014-2017 (c) Prepare adjusting entry to update depreciation of Machine A as at 31 December 2014. (4 marks) (d) Prepare adjusting entry to update depreciation of Machine B as at 31 December 2014 4 marks) (2 marks) 8 marks) (You may need to refer to PPT slides 18-19. Chap. 9) (e) If Kobe sold Machine B on 30.June 2016 for S30.000. prepare adjusting entries to (i) (ii) update depreciation of Machine B in the year of disposal and record the transaction on disposal of Machine B (12 marks) ENDExplanation / Answer
A-
cost of machine
90000
scrap value
10000
Amount to be depreciated
80000
life of machine
5
Annual depreciation
80000/5
16000
Accumulated depreciation
72000
Machine were purchase 4.5 Years back
72000/16000
4.5
Machine were purchased on July 1 2010
B-
cost of machine
180000
scrap value
25000
Amount to be depreciated
155000
life of machine
3
straight line method rate of depreciation
1/3
0.333333
double declining rate
.3333*2
66.66%
Year
cost of machine
depreciation rate
annual depreciation
year end balance
Accumulated depreciation
April 1 2014
188000
dec 31 2014 for 9 months
188000
66.66%
93990.6
94009.4
93990.6
dec 31 2015
94009.4
66.66%
62666.67
31342.73
156657.3
dec 31 2016
31342.73
66.66%
20893.07 (use 6342.73)
25000
159828.6
dec 31 2015
10449.66
66.66%
6965.746 (Use 0)
25000
C-
Depreciation expense
8000
accumulated depreciation-machine A
8000
D-
depreciation expense
93990.6
accumulated depreciation- machine B
93990.6
E-
Depreciation expense
3171.365
accumulated depreciation
3171.365
F
cash
30000
accumulated depreciation-machine B
159828.6
machine -B
180000
gain on sale of machine -B
9828.631
A-
cost of machine
90000
scrap value
10000
Amount to be depreciated
80000
life of machine
5
Annual depreciation
80000/5
16000
Accumulated depreciation
72000
Machine were purchase 4.5 Years back
72000/16000
4.5
Machine were purchased on July 1 2010
B-
cost of machine
180000
scrap value
25000
Amount to be depreciated
155000
life of machine
3
straight line method rate of depreciation
1/3
0.333333
double declining rate
.3333*2
66.66%
Year
cost of machine
depreciation rate
annual depreciation
year end balance
Accumulated depreciation
April 1 2014
188000
dec 31 2014 for 9 months
188000
66.66%
93990.6
94009.4
93990.6
dec 31 2015
94009.4
66.66%
62666.67
31342.73
156657.3
dec 31 2016
31342.73
66.66%
20893.07 (use 6342.73)
25000
159828.6
dec 31 2015
10449.66
66.66%
6965.746 (Use 0)
25000
C-
Depreciation expense
8000
accumulated depreciation-machine A
8000
D-
depreciation expense
93990.6
accumulated depreciation- machine B
93990.6
E-
Depreciation expense
3171.365
accumulated depreciation
3171.365
F
cash
30000
accumulated depreciation-machine B
159828.6
machine -B
180000
gain on sale of machine -B
9828.631
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