Topic 6 – Regulation, PP&E and Intangibles


Question 1

Magpie Ltd uses many kinds of machines in its operations. It constructs some of these machines itself and acquires others from the manufacturers. Machine A was acquired on 1 July 2017. Machine A has a useful life of 5 years and has a zero residual value. The Machine A is depreciated on a straight-line basis.

The following information relates to Machine A that it has recorded in the 2017–18 period.

Machine A

Cash paid for machine A, including GST of $8,000

Costs of transporting machine — insurance and transport

Labour costs of installation by expert fitter

Labour costs of testing machine

Insurance costs for 2017–18

Costs of training for personnel who will use the machine

Costs of safety rails and platforms surrounding machine

Costs of water devices to keep machine cool

Costs of adjustments to machine to make it operate more efficiently













  1. Determine the amount at which Machine A should be recorded in the records of Magpie Ltd. For items not included in the cost of the machine, note how they should be accounted for.
  2. Prepare journal entries to record:
    1. The cost of Machine A and any costs to be expensed.
    2. Depreciation expense for the year ended 30 June 2018 for Machine A
  3. Prepare an extract of the Statement of Financial Position as at 30 June 2018.

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