Question

O’Connor Ltd started business on 31 March 2010 in the recycling industry. The company balances its...

O’Connor Ltd started business on 31 March 2010 in the recycling industry. The company balances its accounting records at month-end and its reporting date is 31 December. Ignore GST. The following events occurred during 2010 and 2011:

2010 April 1 Paid $140 000 cash for a second-hand disposal truck. Paid $1 500 cash to recondition the truck’s engine. Aug 31 Paid $600 cash for the truck’s transmission repairs and oil change. Dec 31 Recorded depreciation on the truck at 40% per annum on the diminishing balance. 2011 Mar 13 Paid $600 cash to replace a damaged bumper bar on the truck. Jul 1 Installed a new motor in the truck for a cost of $11 000. The company considered that the carrying amount of the old motor was only $600 at this date, and the old motor was written off. With the new motor installed, the truck’s depreciation rate using the diminishing balance method was revised to 30% from July 1. Dec 31 Recorded depreciation on the truck.

Required: prepare general journal entries to record the above events. Narrations are not required.

Homework Answers

Answer #1
Date Account Debit Credit Calculations
01-04-2010 Truck Dr 141500 140000+1500
To Cash 141500
31-08-2010 Repairs Dr 600
To Cash 600
31-12-2010 Depreciation Dr 42450 141500*40%*9/12
To Truck 42450
13-03-2011 Repairs Dr 600
To Cash 600
01-07-2011 Truck Dr 10400 11000-600
Writing off of Motor 600
To Cash 11000
31-12-2011 Depreciation Dr 36227.5 ((141500-42450)*40%*6/12)+((141500-42450+10400)*30%*6/12)
To Truck 36227.5
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