Question

Problem 3 (20 marks) Bunny's Mining Plus had the following account balances as at 30 June 2018 (2018 financial year end). Machinery Accumulated Depreciation - Machinery Vehicles Accumulated Depreciation — Vehicles $ 102 000 66 000 40 000 14 800 Additional information as at 30 June 2018 1. "Machinery" account consists of one machine (Machine 1), which was purchased on 1 October 2015 with a recorded value $102 000. At the purchase date, the estimated useful life of Machine 1 was 4 years, with a residual value of $6 000. 2. "Vehicles" account consists of one vehicle. 3. The company uses straight-line depreciation for machinery, and uses the diminishing-balance depreciation method for vehicles at an annual depreciation rate of 30%. 4. Ignore GST. The following transactions took place from 1 July 2018 onwards. 2018 1 September Purchased a new machine, Machine 2, for a cash price $80 000, with associated installation costs of $2 000 also paid in cash. 15 November Paid vehicle repairs of $800 in cash. 31 December Trade in the vehicle for a new machine, Machine 3, for a trade-in value of $22 000 and a further cash payment of $3000. 2019 1 March Replaced the motor of Machine 1 at a cost of $9 500 (payment made in cash). After the replacement of the motor, Machine 1's useful life was re-estimated to be 3 years, with a revised residual value of $1 000. The old motor was written off at a carry amount of $400. Required (a) Record the above transactions in the general journal. Provide narration. (20 marks)

Answer 1

Journal entries in the books of Bunny's Mining Plus

Date	Particulars	Debit ($)	Credit ($)
Sept 01	Machinery	82,000
	Cash		82,000
	(Machine 2 purchased and capitalised along with installation costs)
Nov 15	Repairs & Maintenance	800
	Cash		800
	(Vehicles repairs paid)
Dec 31	Depreciation (40,000-14,800)*30%*6/12	3,780
	Accumulated depreciation (Vehicle)		3,780
	(Depreciation for vehicle)
Dec 31	Accumulated depreciation (Vehicle)	18,580
	Machinery	25,000
	Vehicle		40,000
	Cash		3,000
	Gain on sale of vehicle		5,80
	(Vehicle traded in for machine 3 and gain recognized)
Mar 01	Machinery	9,500
	Cash		9,500
	(Motor of machine 1 replaced)
Mar 01	Asset written off	400
	Machinery		400
	(Old motor written off at carrying value)