Tutorial Solutions 5e
PROBLEM SET A 8.3
Problem Set A 8.3
Donut Ltd
2012 $ $
Jan 1 Accumulated Dep’n – Machinery 52,000
Machinery 52,000
(Scrapping machinery fully depr’d 31/12/15)
June 30 Depreciation Expense 3,500
Accumulated Dep’n – Computer 3,500
(Update depreciation $49,000 x 1/7x 6/12)
1
June 30 Cash 31,000
Accumulated Depreciation – Computer 24,500
Gain on Disposal 6,500
Computer 49,000
(Sale of computer)
Calculation of disposal
Cost (1/1/12) $49,000
Accum. Dep’n – Equipment 24,500
[($49,000 x 1/7 x 3.5yrs)]
Carrying amount 24,500
Cash proceeds 31,000
Gain on disposal $6,500
Dec 31 Depreciation – Truck 3,000
Accumulated Dep’n – Truck 3,000
([($27,000-$3,000) x 1/8] update depr’n)
Dec 31 Accumulated Dep’n – Truck (5yrs) 15,000
Loss on Disposal 12,000
Truck 27,000
(Scrapping of truck after 5 years)
2
PROBLEM SET A 8.5
Dragon Ltd
Shark Ltd
Year ending 30 June
$ $
(a) 30/6/13 Depreciation Expense – Machinery 10,000
Accumulated Depreciation – Machinery 10,000
($50,000 x 1/5 or #1 $2000, #2 $5000, #3 $3000)
(b) 30/6/13 Impairment Loss 7,000
Accumulated Impairment Loss Machine #2 7,000
(Writedown of mach #2 to recoverable amount)
Machine CV Recoverable Amt Adj
1 $8,000 $9,000 nil
2 20,000 13,000 7,000
3 12,000 13,000 nil
3
(c) 30/6/14 Depreciation Expense – Machinery 8,250
Accumulated Depreciation – Machinery 8,250
(Depn #1 $2,000, #2 $3,250(13,000/4), #3 $3,000)
(d) 30/6/14 Accumulated Impairment Loss Machine #2 5,250
Income – Impairment Loss Reversal 5,250
(Writedown of mach #2 to recoverable amount)
Machine CV Recoverable Amt Adj
1 $6,000 6,500 nil
2 9,750* 17,000 5,250**
3 9,000 9,500 nil
* $25,000-5,000-7,000-3,250=$9,750
**#2CV had the machine not been impaired
$25,000-5,000-5,000=$15,000 max reversal
permitted $15,000-9,750 =$5,250
This will reinstate #2 to CV of $15,000.
PROBLEM SET A 8.9
4
Chan Ltd
Year end 30 June 2013 $ $
(a) Jul 1 Patent 25,000
Cash 100,000
(Successfully defend Patent)
Jul to Dec 1 Development Costs (expenses) 100,000
Cash/Payables 100,000
(Development expenses incurred in devoping new
product)
Jan 1 Patent 100,000
Development Costs (expenses) 100,000
((Transfer development costs for patent for new
product to asset account)
Apr 1 Brand Expense 30,000
Cash/Payables 30,000
(Developed brand for new product)
May 1 Copyright 250,000
Cash/Payables 250,000
(Purchased copyright)
(b) Amortisation journals entries for year ended 31 December 2013
June 30 Amortisation Expense 18,571
Accumulated Amortisation Patents 18,571
[($80,000 ÷ 8 years) + (($25,000 ÷ 7 years)
+(100,000/10 * 6/12)]
June 30 Amortisation Expense 4,433
Accumulated amortisation Copyrights 4,433
[($36,000 x 1/10) + ($250,000 x 1/50 x 2/12)]
5
(c) Intangible Assets
Patents ($205,000 cost less $28,571 amortisation) (1) $176,429
Copyrights ($286,000 cost less $18,833 amortisation (2) 267,167
Total intangible assets $443,595
(1) Cost ($80,000 + $25,000 + 100,000);
amortisation ($10,000 + $18,571)
(2) Cost ($36,000 + $250,000);
Amortisation ($14,400 + $4,433).
(d) The intangible assets of Wang Ltd consist of two patents and two copyrights. One patent
with a cost of $105,000 is being amortised over 10 years; the other patent granted 1 July
2015 was developed at a cost $100,000 and is being amortised over its legal life of 10
years. A copyright with a cost of $36,000 is being amortised over 10 years; the other
copyright with a cost of $250,000 is being amortised over 50 years.
