Cobalt Ltd Owns an Item of Machinery That Has a Cost

question 6

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 Cobalt's books on 1 July 2003 and 30 June 2004 (rounded to the nearest dollar) ?

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Definitions:

Polluters Pay

The principle that those who produce pollution should bear the cost of managing it to prevent damage to human health or the environment.

Environmental Damage

The harm caused to the natural environment due to human activities or natural disasters.

Import Quota

A restriction set by a government on the quantity of a certain good that can be imported into the country.

Welfare Outcomes

The effects of policies or economic conditions on the well-being and quality of life of individuals or populations.