Question

QUESTION ONE Part A On 1 July 2014, Excel Manufacturing Ltd acquired a machine with the following details: Purchase price $38,000 Machine Installation cost $1,500 Initial testing cost $500 Expected residual value $4,000 Estimated useful life 4 years or 100,000 units of production The machine had produced 27,500 units in the second year. REQUIRED: (a) Calculate the depreciation expense of the machine for the second year under each of the following depreciation methods: i) Straight line ii) units of production iii) Diminishing balance at 25% per year (b) Which depreciation method do you think is more appropriate in the above context? Give your reasons. (4 + 3 = 7 marks) Part B On 1 March 2015 a supplier has waived a debt owing by Saiham Motors Ltd (the Company) amounting to $1,200. In other words, the Company needs not pay the amount, which will reduce the Company's payable balance by $1,200. The Company's accountant shows the $1,200 as "income" on the Company's income statement. REQUIRED: Discuss whether Saiham Motor Ltd's accounting treatment of $1,200 as "income" is consistent with the definition and recognition criteria of income as specified in the Conceptual Framework for financial reporting. (5 marks)

Answer 1

Pocet A Tatal valu f ret 2 salungaialus liofasutia yus based ५a2eo - $५ n22 fo laas Austeae Paint o00 s depaiciat total valu af anh lalculation Maibiar instalatin cest t tal tiga units Produced ्भभ Tatal value of assut-alualt 4000 9900

Dimiasitio nlatskpay Tatol valus- flamdual p Value 4y000 Sy t40000 to)Straigt Liathad inJustiitiple Con aret Dvel tiak and ALIsULIA PastB eausptuak faela for fiai epoty balan aduabud l dbiling CAsdit sttea pe A and redik auount Maamaett the acrunt inuems can dsaited tata anema