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Assig1 Fall20

The document contains 4 questions regarding accounting for non-current assets, depreciation, and related ledger accounts. Question 1 involves calculating depreciation expense, accumulated depreciation, and book value for 3 machines depreciated under different methods. Question 2 provides equipment cost/life information and asks to calculate annual depreciation expense and accumulated depreciation. Question 3 involves calculating profit/loss on asset disposal and non-current asset values for a company. Question 4 provides information on a new vehicle purchase and asks to calculate amounts to capitalize and an anticipated profit/loss on future disposal.

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104 views3 pages

Assig1 Fall20

The document contains 4 questions regarding accounting for non-current assets, depreciation, and related ledger accounts. Question 1 involves calculating depreciation expense, accumulated depreciation, and book value for 3 machines depreciated under different methods. Question 2 provides equipment cost/life information and asks to calculate annual depreciation expense and accumulated depreciation. Question 3 involves calculating profit/loss on asset disposal and non-current asset values for a company. Question 4 provides information on a new vehicle purchase and asks to calculate amounts to capitalize and an anticipated profit/loss on future disposal.

Uploaded by

Rakht e Safr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Q1. In recent years, Kannada Company purchased three machines.

Because of heavy turnover in the


accounting department, a different accountant was in charge of selecting the depreciation method for each
machine, and each selected a different method. Information concerning the machines is summarized
below.

 For the declining-balance method, the company uses the double-declining rate.
 For the units-of-activity method, total machine hours are expected to be 25,000. Actual hours of
use in the 6 years were years were: 2012, 2,000; 2013, 4,500; 2014, 5,500; 2015 1,000; 2016
1,500, and 2017, 10,500
Instructions
(a) Compute the amount of Depreciation expense, accumulated depreciation and book value of each
machine during the life of the machine.
(b) If machine 2 had been purchased on May 1 instead of January 1, what would be the depreciation
expense for this machine in (1) 2010 and (2) 2011?

Q2. At the beginning of 2010, Farooque Company acquired equipment costing $200,000. It was estimated
that this equipment would have a useful life of 6 years and a residual value of $20,000 at that time. The
straight-line method of depreciation was considered the most appropriate to use with this type of
equipment. Depreciation is to be recorded at the end of each year.
During 2012 (the third year of the equipment’s life), the company’s engineers reconsidered their
expectations, and estimated that the equipment’s useful life would probably be 7 years (in total) instead of
6 years. The estimated residual value was not changed at that time. However, during 2015 the estimated
residual value was reduced to $5,000.
Instructions: Indicate how much depreciation expense should be recorded for this equipment each year
by completing the following table.
Year Depreciation Expense Accumulated Depreciation
2010
2011
2012
2013
2014
2015
2016
Q3. At 1 October 2002 Jim had fixed assets as follows:

Land Buildings Machinery


Cost $85,000 $120,000 $74,800
Accumulated depreciation nil 28,920 35,600

Jim’s policy is to provide for a full year’s depreciation in the year of acquisition, but no provision is made
in the year of disposal. Depreciation is provided at the following rates:

Land nil
Buildings written off over 25 year, on the Straight Line Basis (SLM)
Machinery 20% per annum, on the Reducing Balance Method (RBM)

During the year to 30 September 2003, Jim added extension to the buildings at a cost of $6,800. He also
acquired a new machine, by paying the dealer $9,000 by cheque and trading in an old machine for $5,500.

The machine traded in had been acquired in January 2000 at a cost of $11,000.

Required: A) Calculate the profit or loss on the machine which was traded in.

B) As at 30 September 2003, calculate:

(i) The value of Jim’s non-current assets, before deducting depreciation;


(ii) The accumulated depreciation;
(iii) The net book value of non-current assets.

Q4 You are employed in the accounting department of a transport company. One of your tasks is to
maintain the accounting records relating to non-current assets.

During the year to 30 November 2007, a new Lorry was purchased. The invoice includes the following
information:

Date of invoice ----------- 1 January 2007

Volvo model S557 $24,000


Customisation with company logo 1,000
Insurance for year to 31 December 2007 5,000
Fuel Supplied 400
Total cost $30,400

At 30 November 2006, the total cost of the company’s lorries was $242,000, and the accumulated
depreciation was $166,736. During the year to 30 November 2007 a lorry which cost $22,000 and which
had a net book value of $11,264 was sold.

Your company’s policy is to depreciate lorries on the reducing balance basis at a rate of 20% per annum.
It is anticipated that lorries will be sold after three years of use. The expected sale proceeds are 50% of
the cost capitalized on acquisition. A full year’s depreciation is charged in the year of acquisition, and no
depreciation in the year of disposal.
Required:
(a) Calculate the cost of new lorry to be capitalized on acquisition as non-current asset.
(b) Assuming that the new lorry is sold on 31 December 2009, calculate the anticipated loss or profit on
disposal.
(c) Prepare the following ledger accounts for the year to 30 November 2007:
i. Lorries at cost; ii. Accumulated depreciation on lorries

Q5. As a Head of Accounts, you are preparing the final accounts of the company for the year to 31 May,
2017. The draft income statement reports a profit of $43,829. The closing capital balance is $122,548.

The net book value (NBV) of non-current assets has been calculated using the following balances at June
2016.

Cost Accumulated Net Book


Depreciation Value
Vehicles $57,800 $22,540 $35,260
Equipment 74,750 26,561 48,189
Total 132,550 49,101 83,449
Your assistance has not dealt with the information below regarding non-current assets and now you have
to complete the accounts:

 In the year to 31st May, 2017, company traded in a vehicle which had cost $12,800 in July 2014
and replaced it with a new vehicle. The traded-in allowance was $6,875 and the company paid
the balance of $7,465 by the cheque.

The company depreciates vehicles at 25% per annum on the reducing balance basis and equipment at
20% per annum on straight-line method.

A full year depreciation is charged in the year of purchase and NO depreciation is charged in the year of
disposal.

Required: (i) Calculate profit or loss on traded-in of the vehicle.


(ii) The depreciation charge for the year to 31 May 2017.
(iii) The revised profit for the year to 31 May 2017.
(iv) The revised value of non-current assets and capital which should be reported on the statement of the
company at 31st May 2017.

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