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The owner sold some plant and machinery on 15 September 2017 for 78000. She has recorded the cash received but nothing else.
The plant and machinery originally cost 225000 on 1 April 2012.
Depreciation has to be provided at 20% p.a reducing balance on plant and machinery . (full year of depreciation is charged in the year of acquisition and none in year of disposal)so here I calculated (if correctly) accumulated depreciation to the date of disposal should be 151000. and journal entries should be like:
Dr: diposal Cr: asset a/c by 225000
Dr: accumulated dep. a/c Cr: diposal by 151000
Dr: bank Cr: disposal by 78000
Dr: diposal Cr: profit by 4000 (calculated with disposal t-account).And the part that I do not know is that when the information says “recorded cash received and nothing else” does it mean that they did this : Dr: bank (78000) Cr: nothing and none of the other entries? How should I reflect it on suspense account and on SOFP or SOPOL ?
I am really having hard time with this one. Thanks in advance
If all they have done is record the cash and nothing else, then yes – they will have debited cash, but that is all.
So all the journal entries you have listed will be needed, except that because they have already debited cash with 78,000, your third entry would have to be:
Debit suspense account; Credit disposal account with 78,000.As far as the SOPL is concerned we would need to add to the profit the profit on sale as normal.
As far as the SOFP is concerned we would need to reduce the cost and accumulated depreciation as normal.
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