ACC201 - PRINCIPLES OF ACCOUNTING

GROUP ASSIGNMENT

K49 T2.2023 - 2024

ACC201 – Principles of Accounting Group Assignment T2.2023-2024

Instructions:

• Submission should be in PDF format. Font size 12, Times New Roman.

• Assignment cover sheet should be included.

• Show all calculation process in your answers.

• Late submissions will receive 20% deduction.

• Peer Evaluation Form is only used for groups that has issues with group members’ contributions.

• Plagiarism should be checked before submitting. Groups that found cheating or copying each other

will receive zero for both groups.

ACC201 – Principles of Accounting Group Assignment T2.2023-2024

PART A
On January 1, 2022, Shella Co. made the purchase of the following equipment for production in its factory.
Equipment A: The listed price for this machine was $58,000. In addition to this, Shella Co. had to pay the
other fees including: VAT tax of $2,750, freight in expense of $100, shipping insurance of $75, installation
of $75 and an estimation of $90 for oil and lubricants for the equipment in the first year of operation. It was
estimated by the company that this equipment can be used up to 4 years, with the scrap value being $5,000
at the end of year 4.
Equipment B: Shella had to pay a total of $120,000 for the purchase of this equipment. While the estimated
useful life of this equipment is the same as equipment A, the scrap value is planned to be $10,000 instead.
Instructions
1. In recording journal entries for Equipment A:
a. Record its purchase on January 1, 2022.
b. Record annual depreciation at December 31, 2022, assuming the straight-line method of
depreciation is used.
2. Determine annual depreciation expense for Equipment B each year of its useful life under the following
assumption.
a. Shella Co. uses the straight-line method of depreciation.
b. Shella Co. uses the declining-balance method. The estimated rate used is 50%.
c. Shella Co. uses the units-of-activity method and estimates the useful life of the machine is 25,000
units. Actual usage is as follows: 2022, 5,500 units; 2023, 7,000 units; 2024, 8,000 units; 2025,
4,500 units.
d. Which method used to calculate depreciation on Equipment B reports the lowest amount of
depreciation expense in year 1 (2022)? The lowest amount in year 4 (2025)? The lowest total amount
over the 4-year period? Provide relevant explanation.

PART B
JB Hi-fi sells modern technology devices. JB Hi-fi sold 5 HP desktops with total cost of $6,500 to PSO
Consulting. Three months ago, the business decided to write off an amount owed from PSO Consulting as
a bad debt. Until yesterday, the accountant reported to the manager as PSO Consulting had transferred $
6,500 that they owed to the business bank account. The accountant then recorded the transaction as follows:

Cash 6,500
Bad Debts Expense 6,500

The accountant only made one transaction to record the payment from PSO after it had been written off and
claimed that his way is easy and straight-forward. He did not want to use the other methods due to the
complication in the process of recovering the bad debts amount. Do you agree with his opinion? Give your
explanation.