TXA Ltd acquired a machine from Blue Ltd for the following consideration:
- Cash $70, 000
- Land in the books of TXA Ltd the land is recorded at its cost of $650,000. It has a fair value of $450,000.
TXA Ltd also agrees to assume the liability of the Blue Ltd bank loan of $89,000 as part of the machine acquisition.
(a) Calculate the acquisition cost of the machine.
(b) Provide the journal entries that would appear in TXA Ltd.’s books to account for the acquisition of the Machine.
Max Ltd acquires an item of machinery on 1 July 2016 for a total acquisition cost of $61,000. The life of the asset is assessed as being six (6) years, after which time Max Ltd expects to be able to dispose of the asset for $6,000. It is expected that the benefits will be generated in a pattern that is best reflected by the sum—of—digits depreciation approach. On 1 July 2019, owing to unforeseen circumstances, the machinery is exchanged for a motor vehicle. Note the motor vehicle is two years old, originally cost $17,000 and has a fair value of $11,000.
Provide the necessary journal entries for the disposal of the machinery and the acquisition of the motor vehicle on 1 July 2019.
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