Question

Hurdy Electronics has a financial year end of June 30. The following are transactions related to a new machine it purchasedon July 1, 2013

and subsequent costs and events:

2013 July 1 :

Purchased a new machine. The machine had a recommended Gross retail price of $55,000, but after careful negotiation it was purchased for $51,700(including GST).The delivery of the machine cost $1,650 (inc. GST) and installation was $2,750 (inc. GST). The machine was purchased on credit but the delivery and installation charges were all paid in cash.

The estimated life of the machine is to be 5 years, with an annual depreciation rate of 20% per annum straight line. The residual value has been estimated to be $9,000. In addition, there will be yearly maintenance costs of $1,320 (inc. GST) for the machine.

2014 July 1:

   Paid $6,160 cash (inc GST) for the installation of a special device to the machine. The special device improved the machine's productivity, but it was expected that there would be no change to the useful life of the asset, nor the residual value

.

2017 July 1

The management decided to sell the Machine for cash $25 000 (plus GST).

Question: This is the genreral journal of the sale of machinery on 1 July 2017. How to calculate the number 29,400 ?

1 july 2017 Cash                                                      27,500

                     Accumulated Depreciation Machine     29,400

                       Machine                                                           48.200

                       GST Payable                                                      2,500

                       Gain on disposal                                                6,200

Answer 1

I hope the calculattion below explains how the depreciation amount has been calculated.

	Including GST	Without GST
Purchase Price	51700	47000
Delivery charges	1650	1500
Installation	2750	2500
Total	56100	51000
Salvage Value		9000
Depreciation		8400
		(51000-9000)/5
Value after one year		42600
		(51000-8400)
Addition	6160	5600
Value after addition		48200
Revised Depreciation		9800
		(48200-9000)/4
Depreciation for 3 years		29400
		(9800*3)