Case Study One:
On 1 January 2017, Nicolaidis Ltd purchased two identical new machines at a total cost of $700000 plus GST. It was estimated that the machines would have a useful life of 10 years and a residual value of $50000 each. Nicolaidis Ltd uses the straight-line method of depreciation for all of its equipment. The company’s end of reporting period is 31 December.
Case Study Two:
Tamworth Trading Ltd is a company operating in the retail sector. The beginning inventory of Product EF5089 and information about purchases and sales made during June are shown below.
Tamworth Trading Ltd uses the perpetual inventory system, and all purchases and sales are on credit. Selling price is $5 per unit. GST is 10% and is not included in any of the costs and selling prices above. A stocktake on 30 June revealed 5150 units in inventory. Ignore GST.
Case Study Three:
In early July 2019, Masterton Ltd is considering the acquisition of some machinery for $1 320 000 (GST inclusive) to be used in the manufacture of a new product. The machinery has a useful life of 10 years, during which management plans to produce 500 000 units of the new product. The residual value of the machinery is $100 000.
The following projections were made in order to select a depreciation method to be used for the machinery.
In calculating the profit before depreciation, all expenses have been deducted, including the repairs and maintenance expense.
As the accountant for Masterton Ltd, prepare separate depreciation schedules for the machinery for the 5-year period, using the following depreciation methods:
Use the following headings for each schedule: ‘Year ending 30 June’, ‘Annual depreciation expense’, ‘Accumulated depreciation’, ‘Carrying amount at end of year’.