FNSACC321_322_421 Assignment-part-8

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Monarch Institute *

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ACCOUNTING

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Accounting

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Apr 3, 2024

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Page 60 of 88 Activity 9: Depreciation and the Asset Register O’Reilly Pty Ltd purchased a motor vehicle for use in the business on 31 March this year for $42,000 plus GST. In accordance with the firm’s policies and procedures, the accountant believes the cost of the motor vehicle should be allocated equally over its expected useful life of 5 years. It is anticipated that the motor vehicle would have a residual value of $10,000 plus GST. Assuming the balance date is 30 June. 9.1 To be consistent with the depreciation method suggested by the accountant, would the preferred method of depreciation be straight-line depreciation, diminishing balance method or units of production method? Straight-line depreciation Annual Depreciation Amount = Cost – Residual Value (42000-10000)/5= 6400 Life in years

Page 61 of 88 On 31 December, a finishing machine was sold. Accumulated depreciation to 30 June was $10,000. The depreciation for 6 months ended 31 December was $3,000. Its capital cost was $25,000 and accumulated depreciation was $13,000 at date of sale. The machine was sold for cash to Jake Strong for $14,300 (including GST). Balance date is 30 June. 9.2 Finishing machine sale a. Record General Journal entries to account for the depreciation 6 months ended 31 December and the sale of the finishing machine and post to the relevant ledger accounts. General Journal – O’Reilly Pty Ltd Date Details Debit Credit 30/11/XX Machine Disposal 25000 Machine 25000 Transfer asset cost to Disposal Account 30/11/XX Accumulated depreciation 13000 Machine Disposal 13000 Transfer asset accumulated depreciation to Disposal Account 30/11/XX Bank 14300 Machine Disposal 13000 GST collected 1300 Sale of asset to Jake Strong 30/11/XX Machine Disposal 1000 Profit on disposal 1000 Profit on disposal of asset 30/6/XX Machine Disposal 1000 Profit and loss 1000 Transfer Profit on disposal of asset to Profit and Loss account

Page 62 of 88 b. Transfer the profit or loss on disposal to the Profit and Loss account on 30 June. Note: As the accumulated depreciation has been provided at the date of sale, no further depreciation entries are required, and the Depreciation ledger account should have no entries General Ledger Extract Date Details Folio Debit Credit Balance Machinery 30/11/XX Balance N/A 620,000 DR Machine Disposal N/A 25,000 595,000 DR Accumulated Depreciation 30/11/XX Balance N/A 280,000 CR Machine Disposal N/A 13,000 267,000 CR Bank 30/11/XX Balance N/A 20,000 DR Machine Disposal/ GST Collected N/A 14,300 34,300 DR GST Collected 30/11/XX Bank N/A 1,300 1,300 CR N/A Depreciation 30/11/XX Accumulated Depreciation N/A 3000 3,000DR N/A Disposal 30/11/XX Machinery N/A 25,000 25000 DR Accumulated Depreciation N/A 13,000 12,000 DR Bank 13,000 1,000 CR Profit N/A 1000 0 Profit on Disposal 30/11/XX Disposal N/A 1,000 1,000 CR 30/06/XX N/A

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Page 63 of 88 9.3 Asset Register Monarch Manufacturing purchased a new forklift and a packing machine. A check of Monarch’s records revealed that an Asset Register record for the forklift vehicle and the packing machine had not been created. The Manager has now asked you to prepare the Asset Register record for these assets consistent with Monarch Manufacturing’s organisational policy and procedures. She has provided you with the following information: Packing Machine  A packing machine, an Ultra Speedpack was purchased for $65,000 (excluding GST) on the 1 July 2017 from Melbourne PacktoGo.  The packing machine was located at Monarch’s Melbourne factory.  The estimated life of the packing machine was set at 5 years.  Our internal asset number PACK32 was assigned to the asset.  The company accountant has instructed that straight line depreciation method will be used to estimate the residual value at the end of the effective life to be $5,000. Forklift  A forklift, a Toyota Hi-Lift, was purchased for $80,000 (excluding GST) on the 1 July 2018 from Queens Street Toyota.  The forklift was registered for road use with registration no. ABC-123.  The forklift was located at Monarch’s Melbourne factory.  The estimated life of the forklift was set at 5 years.  Our internal asset number FORK16 was assigned to the asset.  The company accountant has instructed that straight line depreciation method will be used to estimate the residual value at the end of the effective life to be $5,000.

Page 64 of 88 a. Prepare the Asset Register record for the two assets and complete as of 30/6/2019. Monarch Manufacturing – Asset Register Record Packing Machine Asset No.: PACK32 Asset Description: Packing Machine Vehicle Reg. No.: n/a Purchase Date: 1 July 2017 Purchased From: Melbourne PacktoGo Asset Location: Monarch’s Melbourne factory Estimated Life: 5 years. Estimated Residual: $5,000 Depreciation Method: Straight line depreciation method Disposal Date: n/a Disposal Proceeds: n/a Date Asset Cost Depreciation Accumulated Depreciation Carrying Amount Comments 1/7/17 65,000 65,000 Cost price 30/6/18 12,000 12,000 53,000 Depreciation 30/6/19 12,000 24,000 41,000 Depreciation Monarch Manufacturing – Asset Register Record Forklift Asset No.: FORK16 Asset Description: Forklift, Toyota Hi-Lift Vehicle Reg. No.: ABC-123 Purchase Date: 1 July 2018 Purchased From: Queens Street Toyota Asset Location: Monarch’s Melbourne factory Estimated Life: 5 years Estimated Residual: $5,000. Depreciation Method: Straight line depreciation method Disposal Date: n/a Disposal Proceeds: n/a Date Asset Cost Depreciation Accumulated Depreciation Carrying Amount Comments 1/7/18 80,000 80,000 Cost price 30/6/19 15,000 15,000 65,000 Depreciation

Page 65 of 88 Due to a change in requirements, the forklift was sold on 1 January 2020 for $44,000 (excluding GST). To accurately determine the tax expense for the period, the profit/loss on disposal must be recorded so it can be included in the income statement. The packing machine is to be retained. b. Write a process for maintaining asset register and associated depreciation schedule for disposals. For the Forklift the depreciation for the 6 moths is recorded to the asset register record as for the disposal date. (15000/2)=$7500 c. Using the data from part a and b of this activity, update the Asset Register to show the additional annual depreciation record for the packing machine and the additional depreciation and disposal of the forklift. Monarch Manufacturing – Asset Register Record Packing Machine Date Asset Cost Depreciation Accumulated Depreciation Carrying Amount Comments 30/6/19 65,000 12,000 24,000 41,000 Depreciation 30/6/20 12,000 36,000 29,000 Depreciation Monarch Manufacturing – Asset Register Record Forklift Date Asset Cost Depreciation Accumulated Depreciation Carrying Amount Comments 30/6/19 80,000 15,000 15,000 65,000 Depreciation 1/1/20 7,500 22,500 57,500 Depreciation 1/1/20 44,000 Disposal Disposal Details: Date Disposed: 1 January 2020 Proceeds: Change in requirements Gain/Loss on Disposal 13,500 Loss

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