Question

Just explain the part I added red notice for it, only how to get these numbers ( please show me numbers, the calculation, what to add multiple, dividend to get this result

Refrence

Deegan. (2016). Financial Accounting . McGraw-Hill Education, Australia

Presented here are selected transactions for Zhou Ltd for the year ended 31 December 2019: Zhou Ltd Jan 1 $ 2019 Jan. 1 $ 60,000 June 30 Scrapped a piece of machinery that was purchased on 1 January 2009 at a cash price of $66,000 (incl. GST). The machinery had a useful of 10 years with no residual value. Sold a computer that was purchased on 1 January 2016 for $33,000 cash (Incl. GST). It had a useful life of 6 years with no residual value. The computer was sold for $13,200 cash (Incl. GST) Discarded a delivery truck that was purchased on 1 January 2015 for $22.000 (incl. GST) cash and was depreciated based on a 6-year useful life with a $2,000 residual value (there is NO GST on residual value). Accumulated Depreciation - Machinery Machinery (Machine scrapped fully depreciated. Cost-66,000/1.1) 60,000 Dec. 31 June 30 2,500 Depreciation Expense Accumulated Depreciation - Computer ($30,000 (33,000/1.1)x 1/6x6/12 - dep'n to date of sale] 2,500 June 30 Required Cash Accumulated Depreciation - Computer Loss on Disposal Computer GST collected 13,200 17.500 500 Journalise all entries required on the listed dates, including entries to update depreciation, and where applicable, on assets disposed of. Zhou Ltd uses straight line depreciation (Assume depreciation is up to date as of 31 December 2018 and GST rate is 10%). 30,000 1,200 Calculation of loss on disposal Cost Accumulated Depreciation (5,000 x 3 years +2,500) Carrying amount of equipment sold Proceeds from sale excluding GST Loss on disposal $30,000 (17,500) 12,500 12,000 $500 Dec 31 3,000 3,000 Depreciation Expense Accumulated Depreciation - Truck [($20,000* - $2,000) X 1/6] (Update depreciation) *22,000/1.1 Dec 31 5,000 15,000 Loss on Scrapping Accumulated Depreciation - Truck [($20,000 - $2,000) x 5] Delivery Truck (Removal of asset from books) 20,000

Answer 1

2 amounts have been marked in red in the above images : a) GST collected : 1200$; b) Loss on Disposal : 500$

Important conceptual clarity for providing explanation for red marked figures :

-> Before providing explanation and workings for both of the above red marked items, I would first like to provide clarity on a simple concept. An asset is generally recorded in books of accounts exclusive of the GST paid, i.e., if an asset is purchased for 10,000$ and GST@10% of 1,000$ is paid on its purchase, asset is recorded at 10,000$ only and GST Input is recorded separately which is usually set-off against GST output.

-> Hence where we are given in the question that "a computer was purchased for 33,000$ which is inclusive of GST paid @10%, this means that this value of 33,000$ consists of 2 components - Cost of asset + GST paid for asset, which means it represents 110% of the value. Hence to calculate the original cost of asset we have to simply divide 33,000# by 110% and we get 30,000$ as the original cost of the asset and GST paid of 3,000$.

Explanations and workings for both red marked figures are as follows :

a) GST Collected : 1200$

We have been given in the question that the computer has sold for 13,200$ and this price is "inclusive of GST". This means that the price is already inclusive of 10% GST which was collected on sale.

Hence original sale price without GST = 13,200/110% = 12,000$
GST @10% on sale price = 12,000*10% = 1,200$

b) Loss on Disposal : 500$

This has been correctly calculated in the working shown just below the entry in the image of the answer. I will explain that working for calculation of loss on disposal :

Calculation of loss on disposal
Particulars	Amount	Workings
Original Cost of asset	30,000 $	(Refer 2nd parargraph of the conceptual clarity provided above)
Less : Accumulated Depreciation for 3.5 years	17,500 $	(30,000$ *(3.5/6) )
Carrying amount of computer as on June 30	12,500 $
Less : Sale price	12,000 $	(Given in question)
Loss on Disposal	500 $