MCC company uses straight-line depreciation (round to the nearest whole month) and adjusts its accounts annually on 31 December. On 1 January 2016, MCC purchased a van for $450,000 which has an estimated useful life of 9 years and no residual value. On 1 January 2021, the company incurred the following expenditure on the van: (i) (ii) (iii) $1,500 for annual maintenance and servicing $60,000 to upgrade the van with a new and more powerful engine $1,000 to paint the van after 5 years of use. On 1 January 2021, the useful life of the van was revised to 13 years with a residual value of $15,000. Required: (a) What is the book value of the van as at 31 December 2020? (b) Journalize annual depreciation of the van on 31 December 2021. Show workings.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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MCC company uses straight-line depreciation (round to the nearest whole month) and adjusts its accounts
annually on 31 December. On 1 January 2016, MCC purchased a van for $450,000 which has an estimated
useful life of 9 years and no residual value. On 1 January 2021, the company incurred the following
expenditure on the van:
(i)
(ii)
(iii)
$1,500 for annual maintenance and servicing
$60,000 to upgrade the van with a new and more powerful engine
$1,000 to paint the van after 5 years of use.
On 1 January 2021, the useful life of the van was revised to 13 years with a residual value of $15,000.
Required:
(a) What is the book value of the van as at 31 December 2020?
(b) Journalize annual depreciation of the van on 31 December 2021. Show workings.
Transcribed Image Text:MCC company uses straight-line depreciation (round to the nearest whole month) and adjusts its accounts annually on 31 December. On 1 January 2016, MCC purchased a van for $450,000 which has an estimated useful life of 9 years and no residual value. On 1 January 2021, the company incurred the following expenditure on the van: (i) (ii) (iii) $1,500 for annual maintenance and servicing $60,000 to upgrade the van with a new and more powerful engine $1,000 to paint the van after 5 years of use. On 1 January 2021, the useful life of the van was revised to 13 years with a residual value of $15,000. Required: (a) What is the book value of the van as at 31 December 2020? (b) Journalize annual depreciation of the van on 31 December 2021. Show workings.
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