XYZ Trading Company limited Essay Example

XYZ Trading Company limited

General Journal entries

1/1/2012

Machine A

Machine B

To record purchase of machines

$100,000

$150,000

31/12/2012

Depreciation expense machine A

Depreciation expense machine B

Accumulated depreciation machine A

Accumulated depreciation machine B

To record depreciation expense for machines

30/6/2013

Depreciation expense Machine A

Depreciation expense Machine B

Accumulated depreciation machine A

Accumulated depreciation machine B

To record depreciation expense for machines

30/6/2013

Revaluation surplus

Machine A

To record loss on revaluing machine A

30/6/2013

Machine B

Revaluation surplus

To record profit on revaluing machine B

1/1/2014

Machine B repair expenses

To record repairs on machine B

1/1/2014

Machine B on revaluation

Revaluation surplus

Machine B fair value

Accumulated depreciation

To record revaluation of machine B after repairs

$161,375

31/3/2014

Machine C

Accumulated depreciation machine A

Trade in loss

Machine A

To record trade in of Machine A for C

30/6/2014

Machine C

Revaluation surplus

To record profit on revaluation of machine C

30/6/2014

Revaluation surplus

Machine B

To record loss on revaluing machine B

Depreciation

Machine A = ($50,000 -$5,000)/10 years

Machine B = ($100,000 -$10,000)/10 years

2013 up to June 30th

Machine A = ($50,000-$5,000)/10 years

= $4,500 *6/12

Machine B = ($100,000 -$10,000)/10 years

= $9,000 *6/12

Carrying amount = Purchase price –Accumulated depreciation

Accumulated depreciation machine A = $4,500+ $2,250 = $6,750

Accumulated depreciation machine B = $9,000 + $4,500 = $13,500

Carrying amount machine A = $50,000 -$6,750 = $43,250

Carrying amount machine B = $100,000 — $13,500 = $86,500

Loss or profit on revaluation = Carrying amount – Fair value

Loss on revaluing machine A = $43,250 -$32,000 = $11,250

Profit on revaluing machine B = $90,000-$86,500 =$3,500

Depreciation after revaluation

Machine A = ($32,000- $1,500)/8 = $3,812.50 = $2,860 (up to March)

Machine B = ($90,000- $4,000)/8 = $10,750 *6/12 = $5,375 (Up to 1st January 2014)

Value of machine B after repair = $90,000-$5,375 +$66,000 = $150,625

New useful life = 7.5 +3.5 years = 11 years

Machine B Depreciation = ($150625-$9,450)/11*6/12 =$6,417 (up to June 2014)

Total depreciation machine B = $6,417 + $5,375 =$11,792

Value of machine A before trade in

Book value = $32,000- $2,860 = $29,140

Loss on trade in = $1, 140

NB// since extra $950 is used for machine C installation, this is considered part of machine C cost that brings it to a state where it can be used for production. Thus, value of machine C = $64,000 +$950 = $64,950

Cash paid = $64,950 -28000 = $36,950

Loss or profit on revaluation = Carrying amount – Fair value

But Machine C has to be depreciated for the three months to June. Thus, depreciation

= ($64,950 -8,000)/8 =$7,119* 3/12 = $1,780

Thus, carrying amount = $64950-1,780 =$6, 3170

Profit on revaluation = $6,500 -63,170 =$1,830

Machine B incurs depreciation of $6,417 as shown above

Thus, carrying amount = $150,625 -$6,417 = $144,208

Thus, loss on revaluation = $144,208 -$140,000 = $4,208