Question

On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent.

Answer 1

Answer:

Follows are the solution to this question:

Explanation:

30.06.2017: Cash/Bank Account   Dr. $450000

Loss to Plant in revenue Dr. $150,000    

Cumulative Depreciation  Dr. $300000  

To the Factory Account  $900000  

(Selling the plant at a loss of $150000)  

Start buying by Jordan Ltd. of Equipment

30.06.2017   Plant Account   Dr.        $ 450000

To Cash /Bank Account                 $450000

(Being an Equipment Buyer)

30.06.2018   Depreciation Account Dr.       $90000

To the Depreciation Accrued           $90000

(Depreciation has been claimed for the plant)

30.06.2018 Profit and Loss Account Dr.     $90000

To Depreciation Account                       $90000

 (P&L Account paid for depreciation)