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Class Example - Walk LTD Question

Walk Ltd needs to prepare general journal entries for the year ended 30 June 2012 regarding its manufacturing machine and aeroplane. The manufacturing machine, purchased for R400,000, has undergone changes in its recoverable amount and useful life. The aeroplane, bought for R850,000, requires depreciation and has incurred inspection costs that need to be accounted for separately.

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4 views1 page

Class Example - Walk LTD Question

Walk Ltd needs to prepare general journal entries for the year ended 30 June 2012 regarding its manufacturing machine and aeroplane. The manufacturing machine, purchased for R400,000, has undergone changes in its recoverable amount and useful life. The aeroplane, bought for R850,000, requires depreciation and has incurred inspection costs that need to be accounted for separately.

Uploaded by

sechabatlake981
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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QUESTION 2 (13 marks)

Walk Ltd has a 30 June year end and manufactures shoes. The following information is
presented to you regarding the manufacturing machine and the aeroplane:

Manufacturing machine

The initial useful life of the machine, which was purchased for R400 000 and taken into use on
1 July 2009, was estimated at four years with no residual value.

The latest model of the machine, the TXT model, was released at the beginning of the 2011
financial year (on 1 July 2010). The value in use of current machine was determined as R240 000
and the fair value less costs of disposal as R200 000.

On 1 July 2011, the TXT model was withdrawn from the market and this led to the recoverable
amount of current machine to rise to R280 000. Management also reconsidered the useful life of
the machine on this date and estimated it as five remaining years with no residual value.

Aeroplane

On 1 July 2008, Walk Ltd bought an aeroplane with a useful life of 20 years, for R850 000. As this
aeroplane had to be inspected and overhauled every three years at a cost of approximately
R150 000 per inspection, it was decided to identify and depreciate these expected costs as
separate components.

On 1 July 2011, the plane was inspected and overhauled at a cost of R152 000. Provision still has
to be made for depreciation on the aeroplane for the current year.

Additional information

• The company’s current year end is 30 June 2012.


• Walk Ltd makes use of the cost model to account for property, plant and equipment.

REQUIRED:

Prepare the general journal entries for the above for the year ended 30 June 2012. Journal
narrations are not required. (13)

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