Question 1 

A. On 1st July 2016 Shortnell Ltd had the following Motor Vehicle assets:

On 1st July 2016 Shortnell Ltd acquired a 3rd Motor Vehicle for $45,000 paying cash of $15000 and negotiating a loan for the balance. The estimated life of the vehicle was 12 years and residual value $3,000. The vehicle was to be depreciated at the rate of 30% using the declining balance method.

Depreciation is recorded on 30th June each year.

On 30th September, 2016 and 30th September, 2018 all three vehicles were serviced at a cost of $5400.

On 31st March, 2019 Vehicle No 1 is sold to AB Traders because it is too small for $12,000.

You are required to:

a. Prepare an extract from the Balance Sheet dated 30th June, 2016 to show the Motor Vehicles account; 

b. Record all the journal entries that took place from 1st July 2016 to 30th June 2019 (ignore GST and show all calculations).

c. If revenue for the financial year 2018 was $58,000, prepare an extract from the Profit and Loss Statement at 30th June 2018 indicating associated expenses for motor vehicles for the year. 

d. Prepare an extract from the Balance Sheet dated 30th June, 2019 to show the Motor Vehicles account. 

B. Describe two other depreciation methods that Shortnell could have used to depreciate the motor vehicles. Which of the four methods do you believe is most appropriate for motor vehicles and why?