f the reporting period is 31 December. REQUIRED: According to relevant accounting standards, prepare journal entries to recognise the transactions of Entity A from 1 January 2015 to 2 July 2020.
Entity A is a listed company in Hong Kong that hires out motor trucks to its part-time drivers to generate revenue.
The draft accounts at the end of the reporting period of 31 December 2017 included the motor trucks which were bought on 1 January 2015.
The economic life of the motor trucks is 6 years. These motor trucks were purchased from Entity B on credit. The listed price was $9,859,375. Entity B always provides a trade discount of 4.00% to Entity A due to its good business relationship. Under the contract, it will be settled by cheque on 15 January 2015 and 15 March 2015 by two payments of 60.00% and 40.00% respectively. Entity A is also responsible for disposing of these motor trucks to the scrap yard for recycling after 6 years. The removal cost of $106,600 will be incurred on 31 December 2020. The delivery cost of $25,028 was incurred on 1 January 2015 by paying a cheque to Entity C.
On 31 December 2017, due to the world trade war, Entity A expected the market would move downward starting from 1 January 2018. On one hand, Entity A estimated that it was able to generate
On 31 December 2018, Entity A expected the market would move upward again because quite a lot of positive news of the world trade war were observed recently. Entity A estimated that it was able to generate $1,805,000 and $4,400,000 cash in the Year 2019 and 2020 respectively. It will then be scrapped on 31 December 2020. Furthermore, these motor trucks could be sold immediately on 31 December 2018 for $5,600,000 and selling costs of $49,600 were also incurred.
On 31 December 2019, Entity A estimates no further impairment loss should be charged.
Due to a shortage of cash, on 30 June 2020, Entity A sold these motor trucks to Entity D which is an independent third party. Entity D paid the agreed price of $750,000 by a post-dated cheque of 1 July 2020 on 30 June 2020. Entity A deposited the cheque on 2 July 2020.
Entity A adopts a straight-line method for
The end of the reporting period is 31 December.
REQUIRED:
According to relevant accounting standards, prepare
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