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Hi Sir
Please I need help with these questions
1–A business purchased an asset on 1 January 20X1 at a cost of $160,000. the asset had an expected life of 8 years and residual value of $40,000. The straight-line method is used to measure depreciation. The financial year ends on 31 December.At 31 December 20X3, the estimated remaining life of the asset from that date is now expected to be only 3 years, but the residual value is unchanged.
What will b the net book value of the asset as 31 December 20X3, for inclusion in the statement of financial position?
A $97,500
B $100,000
C $107,500
D $115000
2–Catt sells goods at a margin of 50%. During the year to 31 March 20X3 the business made purchases totaling $134,025 and sales of $120,000. Inventories at 31 March 20X3 , valued at cost, was $11,385 higher than the corresponding figure at 1 April 20X2.
what was the cost of the goods Catt had drawn out?
A $2 640
B $14 590
C $25 410
D $37 360
1. The depreciation charge initially is (160,000 – 40,000) / 8 = 15,000 p.a.
So as at 31 December 20X3, the net book value will be $115,000.
(From then on, the depreciation charge will be (115,000 – 40,000) / 3 = 25,000 p.a., but this is irrelevant here (assuming that you have typed the question correctly).2. The cost of goods sold must be 120,000 – 50% = 60,000.
If there had been no drawings, then the cost of goods sold would have been 134,025 – 11,385 = 122,640
This would mean that the drawings were 122640 – 60000 = 62640.
Since this is none of the answers, it either means that that the answers in your book are wrong, or that you have mistyped the question. Are you sure that it is ‘margin’ and not ‘mark-up’? And are you sure that you have copied the figures correctly?
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