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QUESTION 2 DISPOSAL OF FIXED ASSETS (20) REQUIRED Answer the following questions from the information given...

QUESTION 2 DISPOSAL OF FIXED ASSETS (20) REQUIRED Answer the following questions from the information given below. All workings must be shown. MICROSOFT EXCEL PACKAGE TO BE USED FOR ANSWER 2.1 Calculate the depreciation for the current financial year on the vehicle that was sold. (2) 2.2 Prepare the Fixed Asset Realisation account in the general ledger to reflect the disposal of the vehicle on 31 August 2016. (4) 2.3 Calculate the depreciation for the current financial year on the new vehicle acquired. (2) 2.4 Calculate the total cost price of the vehicles on 28 February 2017. (2) 2.5 Prepare the Accumulated Depreciation on Vehicles account in the general ledger to reflect all the entries up to the end of the financial year. (5) 2.6 Prepare the following note to the financial statements (amount column for Vehicles only) as at 28 February 2017: Property, plant and equipment (5) INFORMATION Steers Enterprises owns a fleet of motor vehicles. The following balances appeared in the general ledger on 01 March 2016, the beginning of the financial year: Vehicles at cost Accumulated depreciation on vehicles R1 000 000 R400 000 Additional information ■ On 31 August 2016, a vehicle that cost R200 000 was sold for R32 000 cash. The accumulated depreciation on this vehicle was R165 000 on 01 March 2016. ■ On 01 December 2016 a new vehicle was purchased for R250 000 cash. ■ Deprecation is provided for on vehicles at 20% per annum on the diminishing balance.

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Expert Solution

At The beginning of the year;(March01,2016)
A Vehicle at Cost          1,000,000
B Accumulated depreciation on vehicle              400,000
For the vehicle sold on August 31,2016
C Cost of Vehicle              200,000
D Accumulated depreciation on March 01, 2016              165,000
E Selling Price                32,000
F Depreciation rate on diminishing Balance 20%
2.1 Calculation of depreciation for the current financial year on the vehicle that was sold.
G=C-D Book Value of Vehicle on March01,2016                35,000
H=G*F Annual Depreciation                  7,000
I=H/2 Depreciation expense for six month March-August                  3,500
Depreciation for the current financial year on the vehicle that was sold.             3,500
2.2 FIXED ASSET REALISATION ACCOUNT
Debit Credit
Cash                32,000
Cost of Vehicle    200,000
Accumulated Depreciation              168,500 (165000+3500)
Gain on disposal 500
2.3 Calculation of depreciation for the current financial year on the new vehicle acquired.
Purchase price of new vehicle (Dec01,2016)              250,000
Annual Depreciation                50,000 (0.2*250000)
Depreciation for the current financial year (3 months)           12,500 (50000/4)
2.4 Calculation of total cost price of the vehicles on 28 February 2017.
J Vehicle at Cost(March 01,2017)          1,000,000
K Cost of vehicle diposed off in August , 2016              200,000
L Cost of new vehicle purchased on Dec01,2016              250,000
M=J-K+L Total cost price of the vehicles on 28 February 2017.      1,050,000
2.5 ACCUMULATED DEPRECIATION ACCOUNT AS ON February 28,2017
A Accumulated depreciation on March 01, 2016    400,000
B Depreciation for the year on vehicles available on March01,2016    120,000 (0.2*(1000000-400000)
C Less:Reduction of Depreciation on vehicle sold         3,500
D Add:Depreciation of new vehicle      12,500
E=A+B-C+D Total Accumulated Depreciation    529,000
F Less: Accumulated depreciation removed for sold vehicle    168,500
G=E-F Accumulated depreciation ason February 28, 2017    360,500

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