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At 1 January 2006 Charlie has the following balances in his books in relation to non-current assets:
$
Motor vehicles – cost 150,000
Motor vehicles – accumulated depreciation 60,000
On 1 February 2006, an old car was part exchanged for a new one. The old car was originally purchased on 30 November 2004 for $16,000. The full cost of the new car was $22,000 and
Charlie received a part exchange allowance of $8,000.
Charlie’s policy is to depreciate motor vehicles held at the year end on a straight line basis at a rate of 20% per annum.
Prepare the ledger accounts to record the above transactions for the year ended
31 December 2006.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.
Have you watched my free lectures on depreciation, which explain everything needed to be able to answer this question?
(Obviously in the exam you cannot be asked to write up the ledger accounts.)
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