Question

On 1 January 2016 nm Ltd purchased equipment for a total cost of $280,000. The estimated useful life of the equipment was 4 years, with an estimated residual value of $20,000. The entity’s reporting period ends on 30 June, and it uses the straight-line of accounting for depreciation. On 30 November 2016, $6,500 was spent on repairs and maintenance to maintain the equipment in good working condition. On 1 July 2017, the management of Warren Ltd was informed that the equipment exceeded emissions requirements and could no longer use it in the manufacturing process. Warren Ltd was able to sell the equipment to a scrap metal facility for $80,000. Ignore GST. Required: Prepare the journal entries from the 1 January 2015 to the 1 July 2016.

Answer 1

Journal Entry - Warren Ltd.
Date	Accounts Title	Debit	Credit
1-Jan-16	Equipment	$280,000.00
	Cash		$280,000.00
30-Jun-16	Depreciation Expense	$32,500.00
	Accumulated Depreciation		$32,500.00
	(280000-20000)/4*6/12
30-Nov-16	Repair & Maintainace Expense	$6,500.00
	Cash		$6,500.00
30-Jun-17	Depreciation Expense	$65,000.00
	Accumulated Depreciation		$65,000.00
	(280000-20000)/4
1-Jul-17	Cash	$80,000.00
	Accumulated Depreciation	$97,500.00
	Loss on Sale of Equipment	$102,500.00
	Equipment		$280,000.00