Problem:
ABC Trading operates in a very competitive field. To maintain its market position, it purchased two new machines for cash on 1 January 2012. It had previously rented its machines. Machine A cost $40,000 and Machine B cost $100,000. Each machine was expected to have a useful life of 10 years, and residual values were estimated at $2000 for Machine A and $5000 for Machine B.
On 30 June 2013, ABC Trading adopted the revaluation model to account for the class of machinery. The fair values of Machine A and Machine B were determined to be $32 000 and $90 000 respectively on that date. The useful life and residual value of Machine A were reassessed to 8 years and $1500. The useful life and residual value of Machine B were reassessed to 8 years and $4000.
On 1. January 2014, extensive repairs were carried out on Machine B for $66,000 cash. ABC Trading expected these repairs to extend Machine B's useful life by 2.5 years and it revised Machine B's estimated residual value to $9,450.
Owing to technological advances, ABC Trading decided to replace Machine A. It traded in Machine A on 31. March 2014 for new Machine C, which cost $70,000. A $28,000 trade-in was allowed for Machine A, and the balance of Machine C's cost was paid in cash. Transport and installation cost of $1500 were incurred in respect to Machine C. Machine C was expected to have a useful life of 8 years and a residual value of $8,000.
ABC Trading uses the straight-line depreciation method and recording depreciation to the nearest dollar. The end of its reporting period is 30 June.
On 30 June, 2014 fair values were determined to be $130 000 and $60 000 for Machine B and C respectively.
Required:
Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to June 2014 (Narrations are not required but show all workings)
Attachment:- Metadata.rar