QUESTION 13 [Memo p108; Ex Bk p15]

Ledger, Analysis, Fixed assets note, Ethics

(60 marks; 45 minutes)

PART A [43]
The information below relates to Yenzo Retailers.
REQUIRED:

13.1 Prepare the following ledger accounts. Accounts must be balanced/closed off on 30 June
20.9.

13.1.1 Equipment (9)

13.1.2 Accumulated depreciation on equipment (13)
13.1.3 Asset disposal (9)

13.2 Answer the questions which follow. (12)

INFORMATION:
Information from the accounting records:

Debit Credit
Equipment (30:06:20.9) 150 000
Accumulated depreciation on
32 500
equipment (1:07:20.8)

Note:
 Depreciation on equipment is calculated at 15% p.a. on cost.

 Old equipment was sold for R3 000 cash on 28 February 20.9. This equipment was originally purchased for
R9 800. The accumulated depreciation on this equipment on 1 July 20.8 was R5 100. Only the Equipment
account was updated with this transaction. No other entries were made.

 More equipment costing R25 000 was purchased for cash on 31 August 20.8. This has been recorded.

 Additional printing equipment was purchased on credit on 30 June 20.9 for R8 000. This has also been
recorded.

13.2 QUESTIONS:

13.2.1 Provide TWO possible reasons for disposing off an asset. (2)

13.2.2 An asset can be sold for cash or on credit. Name TWO other ways in which an asset can be
disposed off. (2)

13.2.3 Fixed assets can be depreciated using the fixed instalment method. Name ONE other
method of calculating depreciation. (1)

13.2.4 The owner of Yenzo Retailers recently discovered that some of his drivers are using the
business vehicles for their personal use.

(a) Should the owner be concerned about this? Explain why. (3)
(b) Provide TWO control measures that the owner can put in place to exercise better
control over the use of the vehicles. (4)
PART B [17]

Sandile is the newly appointed bookkeeper of Trident Traders. She is not sure as to how to complete the
Fixed/Tangible assets note for the year ended 28 February 20.9. She requested your help.

REQUIRED:

13.3 Use the information supplied to complete the Fixed/Tangible asset note on 28 February 20.9. (12)

13.4 Answer the questions which follow. (5)

INFORMATION:

 Cost price of vehicles on 1 March 20.8: R250 000.

 Carrying value of vehicles on 1 March 20.8: R128 000.

 No entry had been made for an old vehicle which was sold on 1 September 20.8. The details of this
transaction are as follows:
- Cost price: R98 000
- Carrying value on 1 March 20.8: R40 000
- Selling price: R32 500

 A new vehicle will be purchased during March 20.9 for R135 000.

 The depreciation rate on vehicles is 20% p.a. according to the diminishing balance method.

13.4 QUESTIONS:

13.4.1 Calculate the total accumulated depreciation on the vehicle sold on 1 September 20.8. (2)

13.4.2 Calculate the profit or loss on the vehicle sold. (3)

 QUESTION 13 [Study Guide p17; Memo p108]
Ledger, Analysis, Fixed assets note, Ethics
(60 marks; 45 minutes)

PART A [43]
13.1 GENERAL LEDGER OF YENZO RETAILERS
BALANCE SHEET ACCOUNTS SECTION
13.1.1 Dr Equipment B Cr (9)

13.1.2 Dr Accumulated depreciation on equipment B (13) Cr

NOMINAL ACCOUNTS SECTION

13.1.3 Asset disposal N (9)

13.2.1 Identify TWO possible reasons for disposing off an asset. (2)


13.2.2 Name TWO other ways in which an asset can be disposed off. (2)


13.2.3 Name ONE method of calculating depreciation. (1)

13.2.4 (a) Should the owner be concerned about this? Explain why. (3)
YES / NO

(b) Provide TWO control measures that the owner can put in place to exercise (4)
better control over the use of the vehicles.


PART B [17]
13.3 NOTE TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 20.9
TANGIBLE/FIXED ASSETS (12)
Vehicles
Carrying value at beginning of year
Cost
Accumulated depreciation
Movements
Additions at cost
Disposals at carrying value
Depreciation for the year
Carrying value at end of year
Cost
Accumulated depreciation

13.4. Calculate the total accumulated depreciation on the vehicle sold on 1

1 September 20.8. (2)
13.4.
2 Calculate the profit or loss on the vehicle sold. (3)

QUESTION 13 [Study Guide p17; Ex Bk p15]

Ledger, Analysis, Fixed assets note, Ethics
(60 marks; 45 minutes)
PART A [43]
13.1 GENERAL LEDGER OF YENZO RETAILERS
BALANCE SHEET ACCOUNTS SECTION
13.1.1 Dr Equipment B (9) Cr
20.8 20.9
July 1 Balance* b/d 126 800 Feb 28 Asset disposal GJ 9 800
Aug 31 Bank CPJ 25 000 June 30 Balance (Given) c/d 150 000
20.9
June 30 Creditors control CJ 8 000
159 800 159 800
July 1 Balance b/d 150 000

*(9 800 + 150 000) – (25 000 + 8 000)

13.1.2 Accumulated depreciation on equipment B (13)

20.9 20.8
Feb 28 Asset disposal③ GJ 6 080 July 1 Balance b/d 32 500
20.9
June 30 Balance c/d 48 075 Feb 28 Depreciation① GJ 980
June 30 Depreciation② GJ 20 675
(17 550 + 3 125)
54 155 54 155
July 1 Balance b/d 48 075

NOMINAL ACCOUNTS SECTION

13.1.3 Asset disposal N (9)
20.9 20.9
Feb 28 Equipment GJ 9 800 Feb 28 Acc dep on equip. GJ 6 080
[5 100 + 980]③
Bank CRJ 3 000
Loss on sale of asset GJ 720
9 800 9 800

① 9 800 x 15% x 8/12 = R980

② [126 800 – 9 800 x 15%] + [25 000 x 15% x 10/12]
= 17 550 + 3 125 = R20 675
③ 5 100 + 980 = R6 080

13.2.1 Identify TWO possible reasons for disposing off an asset. (2)
Any 2 valid reasons 
Old, high running costs, under-utilised, obsolete, etc.

13.2.2 Name TWO other ways in which an asset can be disposed off. (2)
Any 2 ways 
Donation; Trade-in; Scrapped / Taken over by the proprietor for personal use.

13.2.3 Name ONE other method of calculating depreciation. (1)

Diminishing balance method.

13.2.4 (a) Should the owner be concerned about this? Explain why. (3)
Yes.
Vehicle is not available for business use, maintenance and repairs are being done by the business,
lifespan of vehicle is shortened.
Any other appropriate answer.

(b) Provide TWO control measures that the owner can put in place to exercise
better control over the use of the vehicles. (4)
Any 2 measures 
Install tracking devices.
Signing in and out of vehicles.
Keys to be handed in.
Keep a logbook.
Any other appropriate answer.

PART B [17]

13.3 NOTE TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 20.9

TANGIBLE/FIXED ASSETS (12)

Vehicles
Carrying value at beginning of year 128 000 
Cost 250 000 
Accumulated depreciation (122 000) 
Movements (57 600)
Additions at cost 0
Disposals at carrying value①(98 000 – 62 000) (36 000) 
Depreciation for the year②(4 000 + 17 600) (21 600) 
Carrying value at end of year 70 400 
Cost 152 000 
Accumulated depreciation
(122 000 + 21 600 – 62 000) (81 600) 
① 98 000 – 40 000 = 58 000 + 4 000 = R62 000 (total accumulated depreciation on equipment sold)
98 000 – 62 000 = R36 000
OR 40 000 (carrying value) x 20% x 6/12 = R4 000 (current depreciation)
40 000 – 4 000 = R36 000

② [250 000 – 98 000] – [122 000 – 58 000] x 20%

[152 000 – 64 000] x 20%
88 000 x 20% = R17 600
Total: 17 600 + 4 000 = R21 600

13.4.1 Calculate the total accumulated depreciation on the vehicle sold on 1

September 20.8. (2)
98 000 – 40 000 = R58 000
58 000 + 4 000 = R62 000

13.4.2 Calculate the profit or loss on the vehicle sold. (3)

98 000 – 62 000 (see 4.1.1) = R36 000
36 000 – 32 500 = R3 500 [loss]