Question

1. On 1 July 2017, Entity A purchased a chemical machine from Entity B on credit.  The purchase price was $3,560,000 and it will be fully settled on 1 August 2017. A legal and professional fee of $25,000 was paid by a cheque to Entity C in order to ensure the machine can be ready for use on 1 July 2017. The useful life of the machine is 5 years without any residual value.

   According to the purchase contract, Entity A is required to remove the plant on 30 June 2022 and Entity A estimated the dismantling costs of the plant will be $55,123 on that day. Entity A considered that a discount rate of 10.50% is appropriate for the calculation of present value.

   However, on 30 June 2022, the actual dismantling costs were only $45,000 and they were paid by a direct bank transfer to Entity D.  On the same day, a recycling company, Entity E, purchased all the machine scraps by $12,500 on credit and agreed to pay in full on 16 July 2022.

   REQUIRED:

   According to relevant accounting standards, prepare journal entries to record the transactions of Entity A from 1 July 2017 and 16 July 2022.

   ACCOUNT NAMES FOR INPUT:

   | Machine | Land | Building | Bank | Payable | Receivable | Retained earnings | No entry | Other income |

   | Other expense | Interest expense | Interest revenue | Depreciation | Accum. depreciation | Impairment loss |

   | Restoration liability | Loss on disposal | Gain on disposal | Revaluation surplus | Revaluation deficit |

   ANSWERS:

   Journal Entries:

   Date	Account Name	Debit ($)	Credit ($)	Hints For Items If Necessary
   1-Jul-17	Blank 1	Blank 2
   	Blank 3	Blank 4		Related to Entity B. Judge Dr/Cr side.
   	Blank 5	Blank 6		Related to Entity C. Judge Dr/Cr side.
   	Blank 7	Blank 8		Judge Dr/Cr side.
   1-Aug-17	Blank 9	Blank 10
   	Blank 11		Blank 12
   30-Jun-18	Blank 13	Blank 14
   	Blank 15		Blank 16
   	Blank 17	Blank 18
   	Blank 19		Blank 20
   30-Jun-19	Blank 21	Blank 22
   	Blank 23		Blank 24
   	Blank 25	Blank 26
   	Blank 27		Blank 28
   30-Jun-20	Blank 29	Blank 30
   	Blank 31		Blank 32
   	Blank 33	Blank 34
   	Blank 35		Blank 36
   30-Jun-21	Blank 37	Blank 38
   	Blank 39		Blank 40
   	Blank 41	Blank 42
   	Blank 43		Blank 44
   30-Jun-22	Blank 45	Blank 46
   	Blank 47		Blank 48
   	Blank 49	Blank 50
   	Blank 51		Blank 52
   30-Jun-22	Blank 53	Blank 54		Related to dismantling cost.
   	Blank 55		Blank 56
   30-Jun-22	Blank 57	Blank 58		Related to Entity D
   	Blank 59	Blank 60		P/L item. Judge Dr/Cr side.
   	Blank 61		Blank 62
   30-Jun-22	Blank 63	Blank 64		Related to Entity E
   	Blank 65		Blank 66
   16-Jul-22	Blank 67	Blank 68
   	Blank 69		Blank 70

Answer 1