‘X’ Ltd. purchased two new machines for cash on 1 January 2018. Machine A cost $4000 and Machine B cost $10000. Each machine was expected to have a useful life of 10 years, and residual values were estimated at $200 for Machine A and $500 for Machine B.
On 30 June 2019, ‘X’ Ltd. adopted the revaluation model to account for the class of machinery. The fair values of Machine A and Machine B were determined to be $3200 and $9000 respectively on that date. The useful life and residual value of Machine A were reassessed to 8 years and $150. The useful life and residual value of Machine B were reassessed to 8 years and $400.
On 2 January 2020, extensive repairs were carried out on Machine B for $6600 cash. ‘X’ Ltd. expected these repairs to extend Machine B’s useful life by 3.5 years, and it revised Machine B’s estimated residual value to $945.
‘X’ Ltd. decided to replace Machine A. It traded in Machine A on 31 March 2020 for new Machine C, which cost $6400. A $2800 trade-in was allowed for Machine A, and the balance of Machine C’s cost was paid in cash. Transport and installation costs of $95 were incurred in respect to Machine C. Machine C was expected to have a useful life of 8 years and a residual value of $800.
‘X’ Ltd. uses the straight-line depreciation method, recording depreciation to the nearest month and the nearest dollar. The end of its reporting period is 30 June.
On 30 June 2020, fair values were determined to be $14000 and $6500 for Machines B and C respectively.
Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June 2020. Please show all the required calculations as note at the end of your answer.