ACQUISITIONS, REVALUATIONS, REPLACEMENTS, DEPRECIATION Hamburg Trading operates in a very competitive field. To maintain its market position, it purchased two new machines for cash on 1 January 2013. It had previously rented its machines. Machine A cost $40 000 and Machine B cost $100 000. Each machine was expected to have a useful life of 10 years, and residual values were estimated at $2000 for Machine A and $5000 for Machine B. On 30 June 2014, Hamburg Trading adopted the revaluation model to account for the class of machinery. The fair values of Machine A and Machine B were determined to be $32 000 and $90 000 respectively on that date. The useful life and residual value of Machine A were reassessed to 8 years and $1500. The useful life and residual value of Machine B were reassessed to 8 years and $4000. On 2 January 2015, extensive repairs were carried out on Machine B for $66 000 cash. Hamburg Trading expected these repairs to extend Machine B's useful life by 3.5 years, and it revised Machine B's estimated residual value to $9450. Owing to technological advances, Hamburg Trading decided to replace Machine A. It traded in Machine A on 31 March 2015 for new Machine C, which cost $64 000. A $28 000 trade-in was allowed for Machine A, and the balance of Machine C's cost was paid in cash. Transport and installation costs of $950 were incurred in respect to Machine C. Machine C was expected to have a useful life of 8 years and a residual value of $8000. Hamburg Trading uses the straight-line depreciation method, recording depreciation to the nearest month and the nearest dollarpound. The end of its reporting period is 30 June. On 30 June 2015, fair values were determined to be $140 000 and $65 000 for Machines B and C respectively. Required Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June 2013. (Narrations are not required but show all workings.)

Smart Enterprise bought a machine costing $40,000 on 1 January 2015. Themachine has a useful life of 4 years. The supplier which sold the machine hadagreed to take back the machine for $4,000 at the end of the useful life. Thecompany fiscal year-end is 31 December.Compute the depreciation expense, accumulated depreciation and net book valueof the machine for the years 2015, 2016, 2017 and 2018 using:(i) The straight-line method.(ii) The double-declining balance method.

Gardenia Co. and Lantana Co. both operate in the same industry. Gardenia began its operations in 2017 with a $20 million initial investment in plant and equipment with an expected life of 10 years. Lantana’s net asset base is also $20 million, but its assets are, on average, 5 years old with 10-year expected useful lives on January 1, 2017. Lantana replaces 10% of its assets each year at year-end, while Gardenia, having just entered the industry, does not have immediate plans to replace any assets.   Per year pre-tax net operating cash flow generated $3 million for Gardenia, and $5 million for Lantana. Inflation is expected to be 2% per year, and each company expects to keep pace by increasing its pre-tax net operating cash flow by 2% per year. The cost of Lantana’s planned asset replacements will also increase at 2% per year. (Note: For simplicity, assume that prior to 2017, the replacement cost of Lantana’s assets remained constant.)   Compute return on assets for Gardenia Co. for…

Vietnam Pty Ltd purchased a truck for cash for $52,000 on January 1, 2015. At the time of purchase, it was estimated that the useful life of the vehicle would be 100,000 kilometres and it was expected that it would travel that distance over 5 years. At the end of five years of useful life it was calculated that the truck could be sold for $8,000. The accounting period for Vietnam Pty Ltd is the financial year ending 30 June.   The actual distance covered by the truck was as follows: Year ending 30 June: 2015             10,000 kilometres 2016      25,000 kilometres 2017    31,000 kilometres 2018             23,000 kilometres 2019              8,000 kilometres   Required: 1.Calculate depreciation for the years ending 30th June 2015 to 30 June 2019 using the units of production method. 2.Prepare general journal entries to record the depreciation, using the straight-line method, for the period 1 January 2015 to 30 June 2017.  3.Discuss the nature the depreciation and how depreciation…

On August 1, Rantoul Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $900,000 of 3% U.S. Treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled:   Revenues/costs Amount Cost of store equipment $900,000 Life of store equipment 15 years Estimated residual value of equipment $45,000 Annual store operating costs less depreciation 200,000 Annual expected revenues in years 1-6 250,000 Annual expected revenues in years 7-15 300,000 Prepare a differential analysis as of August 1 presenting the proposed operation of the store for the 15 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). Based on the results disclosed by the differential analysis, should the proposal be accepted? If the proposal…