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Ssm depreciates his machinery at a rate of 20% per annum on a reducing balance basis.
He provides a full year’s depreciation in the year an asset is acquired, and no provision
is made in the year of disposal.
At 1 Nov 2021, the cost of Sam machinery was RM140,900, and the NBV
was RM94,570.
During the year to 31 October 2022, a machine which had cost RM35,000 and had been
depreciated for 4 years was traded in for a new machine. The new machine cost
RM50,000, and the trade in value was RM14,000. At 31 October 2022 the balance of the
cost of the new machine was still outstanding.
Required:
a. Calculate the profit or loss on the machine traded in.
b. Calculate the depreciation charge for machinery for the year to 31 October 2022.
c. Show the following ledger accounts for the year:
i. Machinery at cost.
ii. Accumulated depreciation.Please do not simply type out a full question and expect to be provided with a full answer. You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about and then I will explain.
Given that the old machine is traded in, it is effectively the same as having sold the old machine for 14,000 and having bought a new machine for 50,000.
(Incidentally, you obviously cannot be asked part (c) in the exam because you cannot be asked to prepare ledger accounts.)
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