On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent.

Question

30-09-2020
Business

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On 1 July 2016 Liala Ltd sold an item of plant to Jordan Ltd for $450000 when its’ carrying value in Liala Ltd book was $600000 (costs $900000, accumulated depreciation $300000). This plant has a remaining useful life of five (5) years form the date of sale. The group measures its property plants and equipment using a costs model. Tax rate is 30 percent.

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codiepienagoya codiepienagoya · Answer 1 · 2020-10-05T07:31:57+02:00

Answer:

Follows are the solution to this question:

Explanation:

30.06.2017: Cash/Bank Account Dr. $450000

Loss to Plant in revenue Dr. $150,000

Cumulative Depreciation Dr. $300000

To the Factory Account $900000

(Selling the plant at a loss of $150000)

Start buying by Jordan Ltd. of Equipment

30.06.2017 Plant Account Dr. $ 450000

To Cash /Bank Account $450000

(Being an Equipment Buyer)

30.06.2018 Depreciation Account Dr. $90000

To the Depreciation Accrued $90000

(Depreciation has been claimed for the plant)

30.06.2018 Profit and Loss Account Dr. $90000

To Depreciation Account $90000

(P&L Account paid for depreciation)

anthougo anthougo · Answer 2 · 2021-09-26T15:28:51+02:00

The Journal Entries to record the sale of plant to Jordan Ltd in the books of Liala Ltd are as follows:

Debit Accounts Receivable (Jordan Ltd) $450,000

Credit Sale of Plant $450,000

To record the sale of plant to Jordan Ltd on account.

Debit Sale of Plant $600,000

Debit Accumulated Depreciation $300,000

Credit Property, Plants, and Equipment $900,000

To record the transfer of sold plant to Sale of Plant account.

Debit Loss on Sale of Plant $150,000

Credit Sale of Plant $150,000

To record the loss from sale of plant

Data Analysis:

1 July 2016:

Accounts Receivable (Jordan Ltd) $450,000 Sale of Plant $450,000

Sale of Plant $600,000 Accumulated Depreciation $300,000 Property, Plants, and Equipment $900,000

Loss on Sale of Equipment $150,000 Sale of Plant $150,000 ($900,000 - $300,000 - $450,000)

Thus, the sale of the plant resulted to a loss of $150,000 being the difference between the carrying value of $600,000 and the sale proceeds of $450,000.

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