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Property, plant and equipment

Storm Ltd acquired an item of equipment on 1 July 2016 at a cost of $800,000. On 30 June 2017, Storm’s directors decide to continue using the cost model for equipment. They elect to depreciate the equipment acquired on 1 July 2016 using the straight-line method, over its useful life of five years. The estimated residual value is $40,000.

The remaining useful life is revised on 1 July 2018 – estimated to be six years from 1 July 2018. The estimated residual value is also revised on this date – to $50,000.

The item of equipment is sold on 31 December 2019 for $500,000.

Required:

Prepare journal entries to account for all transactions that took place during the period 1 July 2016 to 31 December 2019, including entries for the acquisition of the equipment, depreciation for each year, and its disposal. Show all relevant dates, narrations and workings.

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