Question

On 2 January 2016, Mentos Ltd purchased a machine for $35 000 plus GST with a...

On 2 January 2016, Mentos Ltd purchased a machine for $35 000 plus GST with a useful life of 5 years and a residual value of $5000. In order to keep the machine running properly, the company has performed regular maintenance and repairs each year since its acquisition. On 30 June 2019, ordinary repairs amounted to $770 plus GST. The company has a 31 December financial year end.

On 3 January 2020, Mentos Ltd decided to completely overhaul the machine’s major operating parts at a cost of $8 000 (plus GST), after which the machine is expected to have a useful life of 4 remaining years and a revised residual value of $3 000. Mentos Ltd uses the straight-line depreciation method.

GST is 10%

Required:

Prepare general journal entries to record:

A.         the purchase of the machine on 2 January 2016

B.         the day-to-day repairs on the machine in 2019  

C.         the overhaul of the machine on 3 January 2020  

D.         the depreciation on the machine for the year ended 31 December 2020

Business   Accounting   
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