In: Accounting
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.
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 | ||||||