Answer to Question #109248 in Accounting for Beatrice

Question

ABC ltd has a machine bought at Kshs 15milliom. The total depreciation provided to date is
Kshs 3.4 million. The firm decides to trade in the machine with a new one costing Kshs 20
million. The supplier of the new machine has agreed with the firm that the old machine is worth
Kshs 2.3 million. The difference will be paid by cheque. Prepare journals and ledgers for this.

Answer 1

Debit investments in non-current assets machine credit settlements with suppliers -  Kshs 15milliom

Debit fixed assets credit investments in non-current assets - Kshs 15milliom

Debit main production credit depreciation - Kshs 3.4 million

Debit settlement account credit settlements with buyers - Kshs 1 7 million