On 1st July 2017 Utensilite Ltd acquired a 3rd Motor Vehicle for $45,000 paying cash of $12,500… 1 answer below »

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On 1st July 2017 Utensilite Ltd acquired a 3rd Motor Vehicle for $45,000 paying cash of

$12,500 and negotiating a loan for the balance. The estimated life of the vehicle was

12 years and residual value $3,000. The vehicle was to be depreciated at the rate of

30% using the declining balance method.

Depreciation is recorded on 30th June each year.

On 30th September, 2017 and 30th September, 2018 all three vehicles were serviced

at a cost of $5,400.

On 31st March, 2019 Vehicle No 1 is sold to Extratta Traders because for $8,000.

You are required to:

a. Prepare an extract from the Balance Sheet dated 30th June, 2017 to show the

Motor Vehicles account; 3 marks

b. Record all the journal entries that took place from 1st July 2017 to 30th June

2019 (ignore GST and show all calculations). 17 marks

c. If revenue for the financial year 2018 was $61,500, prepare an extract from the

Profit and Loss Statement at 30th June 2018 indicating associated

expenses for motor vehicles for the year. 3 marks

d. Prepare an extract from the Balance Sheet dated 30th June, 2019 to show the

Motor Vehicles account. 3 marks

B. Why would Utensilite choose the two methods of depreciation it has? What is

the impact of each method on Profit figures over the life of the asset? Describe

two other depreciation methods that could have been used to depreciate the

motor vehicles. Which of the four methods do you believe is most appropriate

for motor vehicles and why?

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