STAR Ltd's financial year ends on 31 December 2022. On 1 October 2022, STAR Ltd purchased a machine. To prepare the machine for use, the following payments were made on the same day: Cash payment Transportation cost $201,000 5,000 Installation cost Special platform required for installation Machine operator's salary for the month* 2,400 1,500 3,500 *This refers to the salary of the machine operator who was recruited in September to operate the machine when it is operational. The company estimates the machine will be used for five years and have a $12,400 residual value. Identify and compute the cost of the machine to be recognised. Justify your answer. Journalise the transactions. Assume the above payments are paid in cash. Narration is not required. Compute the depreciation expense for the year ended 31 December 2022 using the straight-line method. Round your answer to the nearest $. Compute the depreciation expense for the year ended 31 December 2022 using the double declining balance method. Round your answer to the nearest $.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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STAR Ltd's financial year ends on 31 December 2022.
On 1 October 2022, STAR Ltd purchased a machine. To prepare the machine for use,
the following payments were made on the same day:
Cash payment
Transportation cost
$201,000
5,000
Installation cost
Special platform required for installation
Machine operator's salary for the month*
2,400
1,500
3,500
*This refers to the salary of the machine operator who was recruited in September to
operate the machine when it is operational.
The company estimates the machine will be used for five years and have a $12,400
residual value.
Identify and compute the cost of the machine to be recognised. Justify your answer.
Journalise the transactions. Assume the above payments are paid in cash. Narration is
not required.
Compute the depreciation expense for the year ended 31 December 2022 using the
straight-line method. Round your answer to the nearest $.
Compute the depreciation expense for the year ended 31 December 2022 using the
double declining balance method. Round your answer to the nearest $.
Transcribed Image Text:STAR Ltd's financial year ends on 31 December 2022. On 1 October 2022, STAR Ltd purchased a machine. To prepare the machine for use, the following payments were made on the same day: Cash payment Transportation cost $201,000 5,000 Installation cost Special platform required for installation Machine operator's salary for the month* 2,400 1,500 3,500 *This refers to the salary of the machine operator who was recruited in September to operate the machine when it is operational. The company estimates the machine will be used for five years and have a $12,400 residual value. Identify and compute the cost of the machine to be recognised. Justify your answer. Journalise the transactions. Assume the above payments are paid in cash. Narration is not required. Compute the depreciation expense for the year ended 31 December 2022 using the straight-line method. Round your answer to the nearest $. Compute the depreciation expense for the year ended 31 December 2022 using the double declining balance method. Round your answer to the nearest $.
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