Question

Just explain the part I added red notice for it

Refrence

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

On 3 January 2017, Bennetti Ltd paid $33 000 net of GST for a machine with a useful life of 10 years and a residual value of $3000. On 31 December 2021, accumulated depreciation on the machine was $15 000. The machine was sold on 31 May 2022. Required (a) Prepare a general journal entry to record depreciation on the machine for the five months in 2022. Use the straight-line depreciation method. (b) Prepare an entry to record the sale of the machine on 31 May 2022 assuming a selling price of: i. $17,600 incl. GST. ii. $19,580 incl GST.

Refrence

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

Answer 1

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Bennett:
Your queries are resolved below:
Accumulated Depreciation- Machinery
Straight Line Method		Note
Cost of machine	33,000.00	A
Less: Residual Value	3,000.00	B
Depreciable Value	30,000.00	C=A-B
Life (Years)	10.00	D
Depreciation per year	3,000.00	E=C/D
Depreciation for 2017 to 2021 (5 years)	15,000.00	F=E*5
Depreciation for 5 months (Jan to May) 2022	1,250.00	G=E/12*5
Accumulated Depreciation till 2022	16,250.00	H=F+G
GST Collected
GST is 10%
Let value of sale value excluding GST be	100X
GST rate	10%
GST collected on sales is 10% of 100X	10X
So sale value including GST be	110X
But sale value including GST is given	17,600.00
It means
110X	17,600.00
X=	17600/110
X=	160
Sale value excluding GST	$ 100 X
Sale value excluding GST	100*160
Sale value excluding GST	16,000.00
GST Collected
Sale value including GST	17,600.00
Less: Sale value excluding GST	16,000.00
GST Collected	1,600.00
Entry in part b ii
Cash at Bank	19,580.00
Proceeds on sale of machinery		17,800.00
GST Payable		1,780.00
This entry is not necessary and you can ignore this entry as there is already a compound entry of sale of machine in next part which is below:
Cash at Bank	19,580.00
Accumulated depreciation- machinery	16,250.00
Machinery		33,000.00
Gain on sale of machinery		1,050.00
GST Collected		1,780.00
GST Collected
GST is 10%
Let value of sale value excluding GST be	100X
GST rate	10%
GST collected on sales is 10% of 100X	10X
So sale value including GST be	110X
But sale value including GST is given	19,580.00
It means
110X	19,580.00
X=	19580/110
X=	178
Sale value excluding GST	$ 100 X
Sale value excluding GST	100*178
Sale value excluding GST	17,800.00
GST Collected
Sale value including GST	19,580.00
Less: Sale value excluding GST	17,800.00
GST Collected	1,780.00