Problem 2 Depreciation Tong Manufacturing Ltd. started in Jan 2011, and has a fiscal year end of 30 June. The new CFO of Tong Manufacturing needs an updated depreciation schedule following the format show below. The information is needed in this format to compare with old depreciation software and to input your data into the new software. The format and the list of depreciable assets are on the following page. Your calculations will also be used as supporting schedules for the year-end financial audit beginning in July of 2014 for fiscal year ending 30 June 2014. Tong Manufacturing Ltd purchased machine Model 502 on 1 October 2012. The machine was not ready for full production until 1 January 2013. Information that may be needed for your depreciation calculations is as follows: Machinery 502: Purchase Price 90,000 Shipping in 7,500 GST 9,000 Set up Preparation 2,600 Set up Costs 12,000 Trial run costs 3,500 Interest cost during set up 400 Residual value 10,000 Repair damage during installation 3,500 Estimated useful life: 8 years or 50,000 units Units of production Year: Jan-June 2013 3500 units Units of production 2013-14 8500 units Residual value: $ 10,000 Machinery 501: Estimated useful life: 8 years or 24,000 units Units of production 2011 2,000 units 2011-12 4,000 units 2012-13 3,500 units 2013-14 3,500 Residual value: $ 3,000 Required: a. Prepare a worksheet in good form showing the capitalised cost of Machine 502 and explanations for any amounts you did not use. Marks: 1 b. Prepare a supporting worksheet with your calculations for each asset on the depreciation schedule to show the CFO how your calculations were prepared. Show the depreciation calculations for each asset for each fiscal year. (You must show how you calculated the reclining balance rates.) Marks: 4 c. Create and complete the depreciation schedule with the numbers from your supporting worksheets. Marks: 2
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