Nevertire Ltd purchased a delivery van costing $52,000. It is expected to have a residual value of $12,000 at the end of its useful life of 4 years or 200,000 kilometres. Ignore GST.
- Assume the van was purchased on 1 July 2019 and that the accounting period ends on 30 June. Calculate the depreciation expense for the second year using each of the following depreciation methods
- diminishing balance (depreciation rate has been calculated as 31%)
- units of production (assume the van was driven 50,000 kilometers in the first year and 78,000 kilometres during the second financial year).
- Record the adjusting entries for the depreciation at the end of the second financial year using straight-line method.
- Show how the van would appear in the balance sheet prepared at the end of year 2 using Straight-line method.
The following information is related to Sunglow Solar Ltd:
- Sales for the year ended 30 June 2019 was $1,200,000
- Provision for warranties before adjustment was $36,000
At 30 June 2019, Sunglow Solar Ltd. adjusted its Provision for Warranties so that it would be equal to 4% of sales for the year ended on that date.
On 16 September 2019, a successful claim for warranty on faulty goods to the cost of $700 was made on Sunglow Solar Ltd.
- Prepare the general journal entry at 30 June 2019 to adjust the Provision for Warranties to the required level.
- Record the payment of the warranty claim on 16 September 2019 in general journal format.
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