In: Accounting
QUESTION 2
DISPOSAL OF FIXED ASSETS
(20)
REQUIRED
Answer the following questions from the information given below.
All workings must be shown.
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.
1.Depreciation for the current financial year on the vehicle that was sold | |
Cost | 200000 |
Less:Acc. Depn. As on Mar.1,2016 | 165000 |
Carrying value as at Mar.1,2016 | 35000 |
Depreciation for the current financial year(for Mar.1-Aug.31,ie. 6mths.) on the vehicle sold | |
35000*20%/12*6= | 3500 |
2.Fixed Asset Realisation account in the general ledger to reflect the disposal of the vehicle on 31 August 2016 | |||
Cost of the asset sold | 200000 | Accumulated depn. Upto the date of sale(165000+3500) | 168500 |
Gain on sale | 500 | Cash realised | 32000 |
200500 | 200500 |
3.Depreciation for the current financial year on the new vehicle acquired | ||
Depn. For (Dec 1 ,2016 to Feb 28 ,2017) ie. 3 mths. | ||
250000*20%/12*3= | ||
12500 |
4.Total cost price of the vehicles on 28 February 2017 | ||
Mar.1,2016 | Beginning balance | 1000000 |
Aug.31,2016 | Sale | -200000 |
Dec1,2016 | Purchase | 250000 |
Cost price of vehicles as at Feb.28,2017 | 1050000 |
5..Accumulated Depreciation on Vehicles account | |||
Debit | Credit | ||
Mar.1,2016 | Beginning balance | 400000 | |
Aug.31,2016 | Current yr. (Mar-Aug.) depn. On vehicle sold | 3500 | |
Depn. On vehicle sold written back | 168500 | ||
Feb 28,2107 | Depn. On new vehicle | 12500 | |
Balance c/d | 247500 | ||
416000 | 416000 |
6..Notes to the financial statements | |
Property, plant and equipment(at cost) | 1050000 |
Less: Accumulated depreciation | 247500 |
Property, plant and equipment(net) | 802500 |
Depreciation a/c | |||
Debit | Credit | ||
Aug.31,2016 | Current yr. (Mar-Aug.) depn. On vehicle sold | 3500 | |
Feb 28,2017 | Depn. On new vehicle | 12500 | |
Balance c/d | 16000 | ||
16000 | 16000 |