Question

Part B Bruce Manufacturing Ltd's post-closing trial balance at 30 June 2019 included the following balances: Machinery Control (at cost) $244 480 Accumulated Depreciation - Machinery Control 113 800 Fixtures (at cost) 308 600 Accumulated Depreciation - Fixtures 134 138 The Machinery Control and Accumulated Depreciation - Machinery Control accounts are supported by subsidiary ledgers. Details of machines owned at 30 June 2019 are as follows: Machine Purchase Cost Estimated Estimated date useful Life residual value 1 28 Apr 2015 $74 600 5 years $3 800 2 04 Feb 2017 $82 400 5 years $4400 3 26 Mar 2018 $87 480 6 years $5 400 Additional information • Bruce Manufacturing Ltd uses the general journal for all journal entries, records depreciation to the nearest month, balances its accounts 6-monthly, and records amounts to the nearest dollar. • Bruce Manufacturing Ltd uses straight-line depreciation for machinery and diminishing balance depreciation at 20% p.a. for fixtures. The following transactions and events occurred from 1 July 2019 onwards: 2019 03 July Exchanged items of fixtures (cost: $100 600; carrying amount at exchange date: $56872; fair value at exchange date: $57 140) for a used machine (Machine 4). Machine 4's fair value at exchange date was $58 000. Machine 4 originally cost $92 660 and had been depreciated by $31 790 to exchange date in the previous owner's accounts. Bruce Manufacturing Ltd estimated Machine 4's useful life and residual value at 3 years and $4580. Lasted Updated: August, 2019 MA 511 Financial Accounting & Reporting Page 4 of 6 10 Oct Traded in Machine 2 for a new machine (Machine 5), that cost $90 740. A trade-in allowance of $40 200 was received and the balance was paid in cash. Freight charges of $280 and installation costs of $1600 were also paid in cash. Bruce Manufacturing Ltd estimated Machine 5's useful life and residual value at 6 years and $5500. Required A. Prepare journal entries to record the above transactions and events. (Narrations are required.)

Answer 1

(A) Journal entries to record the given transactions and events:

Credit Debit $43,728 $56,872 $100,600 Date Account Titles and Explanation 3-Jul-2019 Accumulated Depreciation - Fixtures (100,600 - 56,872) Carrying amount of asset sold - Fixtures Fixtures (To record de-recognition of asset sold) 3-Jul-2019 Machinery Control (Machine 4) Proceeds from sale of asset - Fixtures |(To record sale of asset and recognition of asset acquired) 10-Oct-2019 Depreciation expense (Machine 2) (1,300 x 3) Accumulated Depreciation - Machinery Control (Machine 2) (To record depreciation expense) $ 57,140 $ 57,140 $ 3,900 $ 3,900

Computation of depreciation amount:

Cost price of equipment Less: Salvage value Depreciable value (a) Estimated useful life in months (b) Depreciation per month (a/b) Machine 1 Machine 2 Machine 3 Machine 4 Machine 5 $ 74,600 $ 82,400 $ 87,480 $ 57,140 $ 92,620 $ 3,800 $ 4,400 $ 5,400 $ 4,580$ 5,500 $ 70,800 $ 78,000$ 82,080 $ 52,560 $ 87,120 60 60 72 36 72 $ 1,180 $ 1,300 $ 1,140 $ 1,460 $ 1,210