Financial Accounting - Essay and Problem-Based Questions

Part B: This part of the assignment is worth a total of three (3) marks (details about the allocation of marks in part b are provided below).

 The Research & Development Department of Large Mart is also working on the development of a "study pillow" that allows students to upload study material into their brain whilst sleeping. In order to complete this project, Large Mart has purchased the following items: 

• A car (which is used to transport students participating in a trial of the study pillow to the laboratory) 
• A notebook computer (which is used to record the feedback of students participating in the trial) 

The car was purchased on credit on 11th May 2017. The list price of the car was $45,000, and the car dealer charged an additional amount of $1,000 to deliver the car to the Large Mart Research & Development Department. Large Mart received the car (as well as the invoice for the car) on 15th May. The invoice from the car dealer was paid on 1st June 2017. 

Large Mart expects to use the car for a period of 5 years. At the end of its useful life, the car is expected to have a residual value of $3,000. The depreciation method used for the car is identical to the method that Large Mart is using for other cars (straight-line depreciation). 

On 1st July 201x, the accounting department of Large Mart decides to revalue the car to its fair value of $45,500. 

The notebook computer was purchased on credit on 1st May 2017. The computer had a list price of $5,000. However, because Large Mart purchases all of its notebook computers from this supplier, Large Mart was able to receive an early payment discount of 10%, if the computer is paid within 10 days. Large Mart pays the computer on the day the after the purchase is made and deducts the discount from the payment. After unpacking the notebook computer on 3nd May 201x, Large Mart noticed that the computer was broken and returned it to the supplier. On the same day (3 May 201x) the supplier refunded the payment that was made on the previous day. 

Required:

3) (1.5 marks) - Provide all journal entries that are necessary in the books of Large Mart to account for the revaluation of the car on 1st July 2017 AND provide a detailed outline of all required calculations.