Question

1 Partially correct answer. Your answer is partially correct. Try again. Branson Ltd owns two delivery vehicles (each with a residual value of $4,000 and useful life of 4 years) and uses the straight-line method of depreciation. The business closes its accounting records annually on 30 June. The following events and transactions occurred during the first 3 financial years. Ignore GST. 2016—17 July 1 Purchased a delivery truck from Mangrove Mountain Motors for $50,500 cash plus stamp duty of $520, and registration and third-party insurance of $710. June 1 Made minor repairs to the truck for cash at a cost of $350. June 30 Recorded annual depreciation. 2017—18 July 1 Purchased a delivery van from Northern Motors for cash, $38,000. This van was a used vehicle which was expected to last 4 years from the date of purchase. Fitted four new tyres to the van at a cash cost of $1,110. June 30 Recorded depreciation on both truck and van. 2018—19 July 1 Paid $3,100 for an overhaul of the motor of the delivery truck. This expenditure is expected to extend the useful life by 1 year. The parts replaced in the truck were considered to have a carrying amount of $2,000. Installed a two-way radio in the delivery van at a cost of $1,300 to improve efficiency. This expenditure will not increase the useful life. June 30 Recorded depreciation on both truck and van. Prepare entries (in general journal form) to record the transactions of Branson Ltd as they relate to both vehicles to 30 June 2019.

Answer 1

Journal Entries (Amount in $)

1. Purchase of truck on 1-7-2016

Truck a/c (Fixed Asset) Dr 51,730

To Cash/Bank a/c Cr 51,730

(Initial purchase value capitalised including stamp duty and insurance as cost till asset put to use is capitalised)

2. Repairs on 1-6-17

Repairs a/c(Expenses) Dr 350

Cash/Bank a/c Cr 350

(Minor charges can not be capitalised hence charged off to expenses as revenue expenses)

3. On end of year i.e 30-6-2017

Depreciation on Truck a/c Dr 11,932

To truck a/c Cr 11,932

( Asset - 5,1730

Less : Residual Value - 4,000

Net - 47,730

Devided by 4 Years - 11,932 is depreciation on Straight Line Method for 1st Year)

4. July 1 2017, Purchased a delivery van from Northern Motors for cash, $38,000

Delivery Van a/c (Fixed Asset) Dr 38,000

To cash a/c Cr 38,000

(Asset capitalised on purchase)

5. Fitted four new tyres to the van at a cash cost of $1,110

Delivery Van a/c (Fixed Asset) Dr 1,110

To cash a/c Cr 1,110

(Being new tyres fitted on date of purchase can be capitalised as asset wasnt put to use on that date)

6. Depreciation on June 30th 2018

Depreciation on Truck a/c Dr 11,932

To truck a/c Cr 11,932

(Ref 3 for workings)

(Depreciation for 2nd year charged)

Depreciation on Delivery Van a/c Dr 8777

To Delivery Van a/c Cr 8777

( Asset - 38,000

Add: Tyres capitalised - 1110

Less : Residual Value - 4,000

Net - 35110

Devided by 4 Years - 8777 is depreciation on Straight Line Method for 1st Year)

(Depreciation on delivery van for 1st year)

7.two-way radio in the delivery van at a cost of $1,300 to improve efficiency

Repairs a/c (Expenses) 1,300

To Cash 1,300

(The expense on radio cant be capitalised as it will not incrase the life of asset above previously assessed standard. Hence it is expensed off)