Question

The following trial balance extract has been extracted from Kalorie Limited’s accounting records at 31 March 2018:

Buildings	3 994 600
Buildings – accumulated depreciation – 1 April 2017		1 766 400
Property, plant and equipment – at cost	1 516 600
Property, plant and equipment – accumulated depreciation – 1 April 2017		429 770

On 1 December 2017 a factory building that originally cost $1 350 000 carrying amount of $911 450 was severely damaged in a fire and subsequently written-off. Any gains of losses on capital items are not subject to taxation. Kalorie Limited received a payment of $914 200 from the insurance company in full and final settlement of the claim. This amount has been credited to the Buildings account in the ledger. Buildings are depreciated on the straight-line basis at 5 per cent per annum, while property, plant and equipment are depreciated on the straight line basis at 15 per cent per annum.

Required:

1. Prepare ALL the journal entry/ies that Kalorie Limited should make in its accounting records to account for the buildings and property, plant and equipment for the reporting period ending 31 March 2018.
2. What amount will be disclosed as ‘Depreciation expense’ in Kalorie Limited’s Statement of comprehensive income for the reporting period ending 31 March 2018?

Answer 1

Date	Accounts	Debit	Credit
2017
Dec 31	Depreciation (1,350,000 x 5% x 8)	45,000
	Accumulated Depreciation - Buildings		45,000
Dec 31	Cash	914,200
	Accumulated Depreciation - Buildings	438,550
	Buildings		1,350,000
	Gain on sale if Building		2,750
2018
Mar 31	Depreciation (2,644,600 x 5%)	132,230
	Accumulated Depreciation - Buildings		132,230
Mar 31	Depreciation (1,516,600 x 15%)	227,490
	Accumulated Depreciation - PPE		227,490

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