Question

A machine was purchased on 2 January 2018 for $70 000, net of GST. The machine had an estimated residual value of $12 000 and an estimated useful life of 6 years. Using the sum-of-the-years'-digits method and rounding to the nearest dollar, depreciation expense for the year ended 31 December 2019, is: $13 810. $16 667. $16 571. $20 000.

If a computer with a fully depreciated cost of $10 000 is discarded as worthless, the correct accounting entry to record the scrapping is:

DR Expense on disposal of asset $10 000; CR Computer $10 000.

DR Accumulated depreciation computer $10 000; CR Computer $10 000.

DR Expense on disposal of asset $10 000; CR Accumulated depreciation computer $10 000.

DR Expense on disposal of asset $10 000; CR Proceeds of disposal of asset $10 000.

Assume that a machine with a cost of $90 000 has accumulated depreciation of $48 000 on the date of its disposal. What is the profit or loss on disposal of the old machine if it was traded-in for $40 000 on a new machine? (Ignore GST.)

$40 000 loss.

$2 000 loss.

$8 000 gain.

$42 000 loss.

The balance sheet of Genny’s Consulting showed the following:

	30 June 18		30 June 19
Dividend payable	$30 000		$45 000

What amount will appear in the statement of cash flows for dividends paid for the year ended 30 June 2019?

$15 000.

$30 000.

$45 000.

$75 000.

Bender Ltd uses the allowance method of accounting for bad and doubtful debts. Their accounts show:

Allowance for doubtful debts 1 July 2019		$21 600
Allowance for doubtful debts 30 June 2020		18 000
Bad & doubtful debts expense for the year		4 000

The amount of bad debts actually written off during the year is:

$4 000.

$7 600.

$18 000.

$21 600.

The balance sheets of Rainbow Ltd show:

	31 December 2018		31 December 2019
Current tax liability	$55 000		$65 000

The statement of profit or loss and other comprehensive income for the year ended 31 December 2019 shows income tax expense of $65 000.

What amount, in respect of income tax paid, will appear in the statement of cash flows for the year ended 31 December 2019? Assume tax is paid annually in arrears and there are no over- or under-provisions of tax.

Nil.

$55 000.

$65 000.

$120 000.

Much appreciated!

Answer 1

Answer to Question 1:

Cost of Machinery net of GST = $70,000

Useful Life = 6 years

Residual Value = 12,000

Depreciable Value = ($70,000 - $12,000)

= $58,000

Sum of year = 6+5+4+3+2+1 = 21

Year	Sum of years	Depreciation
1	6/21	16571
2	5/21	13810
3	4/21	11048
4	3/21	8286
5	2/21	5524
6	1/21	2762

Depreciation for 31 st Dec 2019,(Year 2)

• $13,810

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Answer to Question 2:

If a computer with a fully depreciated cost of $10 000 is discarded as worthless, the correct accounting entry to record the scrapping is:

Dr Accumulated Depreciation on Computer $10,000

To, Computer A/c $10,000

(Being retirement of fully depreciated machine)

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Answer to Question 3:

Original Cost = $90000

Accumulated Depreciation = ($48,000)

WDV on the date of Dispoasal = $42,000

Excahnge for New Machine =$40,000

Loss on Disposal = $2000

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Answer to Question 4:

30 June 2018 30 June 2019

Dividend Payable $30000 $45000

The amount that will appear in Statement of Cash Flows for dividend paid in the year June 2019 is:-

• $30,000

Dividend Payable of Year 2018 will be paid in Year 2019 .

................................................................................................................................................................................

Answer to Question 5:

Opening allowance for doubtful debts 1 July 2019 $21 600

Add: Bad & doubtful debts expense for the year    $4 000

Less: Closing Allowance for doubtful debts 30 June 2020 ($18 000)

Bad Debt actually written during the year = $7,600

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Answer to Question 6:

   31 Dec 2018 31 Dec 2019

Current Tax Liability $55,000 $65,000

The amount, in respect of income tax paid, that will appear in the statement of cash flows for the year ended 31 December 2019 is $55,000 as tax due of earlier year (Year 2018) will be paid in the Year 2019 . However, provision is made in the same year.

Answer: $55,000