Tidy Sheets Trading is a business that manufactures linen products. The company\

Question

Tidy Sheets Trading is a business that manufactures linen products. The company's accounts include Factory buildings, Office buildings, Office equipment, Delivery truck and Dyeing & Sewing machines, with a separate Accumulated Depreciation account for each of them. During the year ended 30 June 2014, the business completed the following transactions: Sep 1Purchased a new office equipment on credit at the price of $12 000. The 2013equipment had a useful life of 5 years and residual value of $2 000. Feb 15Purchased land at the price of $70 000. In relation to the purchase, solicitor's fees 2014incurred were $1 100 and $700 was spent on removing a warehouse on the land. All of these were paid in cash. Mar 1 Sold an office building for $370 000 cash. The office building cost $555 000 and 2014had a 40-year useful life and a residual value of $75 000. The building was depreciated on a straight-line basis and its accumulated depreciation up to 30 June 2013 was $255 000 Apr 30 Scrapped a delivery truck that was purchased on 1 May 2004. The delivery truck 2014cost $55 000 and had a useful life of 10 years with no residual value. June 30 Recorded depreciation, as detailed below: 20141. The office equipment, purchased on 1 Sep 2013 (as mentioned above), is depreciated using the diminishing balance method. 2. Dyeing and Sewing machines, costing $20 000, are depreciated by the units- . The machines have a residual value of zero and are of-production method estimated to have a useful life of five years or 5 000 hours. For the year ended 30 June 2014, the machines were used for 900 hours 3. Factory buildings, costing $140 000, are depreciated by the straight-line method over 20 years with no residual value. The buildings had been depreciated up to 30 June 2013. Required: Journalise all the above transactions for Tidy Sheets Trading for the year ended 30 June 2014. Ignore GST. Narrations are not required.

Explanation / Answer

**Accumulated depreciation on office building :

depreciation per year = [555000-75000]/40=12000

depreciation for period [1july2013-28 feb:8 months ] 12000*8/12 = 8000

Total accumulated depreciation :255000+8000= 263000

**depreciation on office equipment :rate =2/useful life = 2/5= .40 or 40%

depreciation for period 1 sep 2013-30june2014 =12000*.40*10/12= 4000

Date Account Debit credit sep 1 2013 office equipment 12000 Accounts payable 12000 [Equipment purchased on credit] feb 152014 Land 71800 cash 71800 [being purchase cost ,solicitor fees and cost of removal cost capitalized 70000+1100+700] mar 1 2014 Depreciation expense 8000 Accumulated depreciation-office building 8000 [depreciation for period 1 july 2013-1march recorded] mar 12014 cash 370000 Accumulated depreciation**-office building 263000 Gain on sale of office building [balance] 78000 office building 555000 April 30 2014 Depreciation expense 4583.33 Accumulaed depreciation -delievery truck 4583.33 [Depreciation for the period 1 july 2013-30 april 2014]55000/10 =5500*10/12 april 302014 Accumulated depreciation-delievery truck 55000 Delievery truck 55000 [being delievery truck scrapped] june 30 2014 depreciation expense 4000 Accumulated depreciation-office equipment*** 4000 30 june 2014 Depreciation expense 3600 Accumulated depreciation -dyeing and sweing machine 3600 [depreciation recorded :20000*900/5000=3600] 30 june2014 depreciation expense 7000 Accumulated depreciation-factory building 7000 [depreciation recorded 140000/20]

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