Beatrice Bainson runs a business altering and repairing clothes. When she started business on 1 January...

Beatrice Bainson runs a business altering and repairing clothes. When she started business on 1 January 2012, she bought a Scoopatitch II sewing machine for GH₵2,500. She depreciates sewing machines using the straight-line method at a rate of 20% pa, and she charges a full year depreciation in the year of acquisition and none in the year of disposal.

The business has now grown such that she needs a faster machine, and she will upgrade to Scoopatitch V during December 2015. The Scoopatitch salesman has offered her a part exchange deal as follows:

Part exchange allowance for Scoopatitch II GH₵750

Balance to be paid in cash for Scoopatitch V GH₵4,850

Required

Show the ledger entries for the year ended 31 December 2015 to reflect this transaction. 7 Marks

Show the relevant extracts in the appropriate financial statements

Solutions

Expert Solution

Solution:

1. Journal Entries

Working Note: Computation of Book Value of Scoopatitch II at the time of the disposal:

2. Extract of Financial Statements

ekkarill92 answered 1 year ago

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