Prepare journal entries to record the transactions

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Question - Zac Ltd is a company involved in the building industry. It purchases trucks for a specific use within the company. Over time, Zac Ltd also needs to reassess each truck and determine whether to overhaul the engines, or to replace the trucks through trade-ins with a local dealer offering good allowances on the trade-ins. As at 30 June 2013, Zac Ltd's trucks included the following:

Truck

Purchase date

Cost

Useful life

Residual value

1

3 January 2011

$124,000

5 years

$6,000

2

1 September 2011

$157,200

4 years

$7,200

3

1 October 2012

$168,400

6 years

$7,600

The following transactions and events occurred during the year ended 30 June 2014:

On 1 August 2013 truck 1 was traded in for a new truck (Truck 4) at a cost of $115,000. A trade in allowance of $50,500 was given, with the remainder being paid in cash. Truck 4 had a useful life of 5 years and a residual value of $5,000.

On 1 September 2013 an overhaul for Truck 2 was undertaken, replacing the engine at a cost of $25,000. This resulted in an assessment of useful life to be 3 years and a residual value of $6,000.

Depreciation was recorded on 30 June 2014.

Required -

1. Prepare journal entries to record the transactions and events for the year ended 30 June 2014.

2. Show the total balance (carrying amount) as at 30 June 2014 for trucks.

Reference no: EM133140194

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