Cobalt Ltd Owns an Item of Machinery That Has a Cost

question 22

Multiple Choice

Cobalt Ltd owns an item of machinery that has a cost of $700,000 and accumulated depreciation of $200,000 as at 1 July 2003. On that date the machine is sold to Blue Ltd for $533,493, and then leased back over 8 years (the remaining life of the machine) . The lease is non-cancellable. The lease payments are $100,000 per annum, payable in arrears on 30 June each year. The interest rate implicit in the lease is 10 per cent and the economic benefits of the asset are expected to be realised evenly over its life. What are the entries to record the transactions in Blue's books on 1 July 2003 and 30 June 2004 (rounded to the nearest dollar) ?

---

Definitions:

Numbness of Extremities

A lack of sensation or feeling in the limbs, such as the hands or feet, often indicative of nerve damage or circulation issues.

Fainting

A sudden, temporary loss of consciousness, often due to a decrease in blood flow to the brain.

Limited Function

Refers to a condition or situation where the capabilities or actions of a system, organ, or individual are restricted.

Fetus Size

A measurement that refers to the dimensions or growth development of a fetus during pregnancy, typically assessed via ultrasound.