Reference no: EM132801326
Question - Ariana Limited acquired a machine on May 1, 2018 for $60,500. Installation costs for the machine was $1,000. On May 1, 2019, in order to reduce operating costs, a custom extension was added to the machine resulting in an expenditure to the company of $8,520. The original residual value was $3,900. Due to the extension, the residual value has been changed to $4,500. Also, total estimated useful life has been changed from total life of 10 years to total life of 13 years.
On March 1, 2020, Ariana Limited purchased a new machine with a market value of $69,900. As part of this acquisition, the company traded in its old machine (which had a fair value of $55,000) and paid $14,000 in cash. They also paid $500 in cash for freight costs for the new machine.
Assume a December 31 year end. The company uses IFRS.
Required - Answer the next three questions using the above information.
What is the new Depreciation calculation on May 1, 2019? Show all your work.
What is depreciation expense for old machine in 2018, 2019, and 2020?
Record the journal entry to record the exchange of assets transaction on March 1, 2020 (Assume there is commercial substance).