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I could not make T account so m making journal entry for this question
Plant and equipment at cost.Dr balance b/f 960000
1 july cash 48000Cr 30 sep disposals 84000
balance c/f 924000the company’s policy is to charge straight line depn at 20%per yr on a pro rata basis. what should be the charge for depn at the year end dec 2006??
I directly calculated depn on closing balance so i did not get correct answer? how should we calculate depn for this ques?my next ques is,
A business’ non-current assets had a book value f 125000. an asset had a cost of 12000 was sold for 9000, at a profit of 2000,
what is the revised book value of NCA?Your first question.
The question says that the deprecation is pro-rata, which means monthly. So you have to calculate each part of the year separately.
The book value (or carrying value) is the cost less the accumulated deprecation.
It was 125,000. The asset sold must have had a book value of 7,000 (9,000 – 2,000) so the book value of those left is 125,000 – 7,000 = 118,000
sir, i was going through solution of 1st ques but i did not understand the way depn was calculated.
it is: depn on other assets (960000-84000)x 20% .. what that depn on other assets mean???/sir, I am very much confused on the topic part exchange allowance. isn’t there video of PEA in depreciation???
Which first question are you asking about??
With regard to part exchange – no, there is no video. If you have a problem with a specific question on it then ask and I will explain.
I could not make T account so m making journal entry for this question
Plant and equipment at cost.Dr balance b/f 960000
1 july cash 48000Cr 30 sep disposals 84000
balance c/f 924000the company’s policy is to charge straight line depn at 20%per yr on a pro rata basis. what should be the charge for depn at the year end dec 2006??
I did not understand why dep was calculation on (924-48)…
The balance was 960,000 from 1 Jan to 30 June – so for the part of the year the depreciation is 6/12 x 20% of 960,000
On 1 Jul they bought for 48000, which made the total 1008000 and it stayed like this until 30 september. So for this part of the year, the depreciation is 3/12 x 20% x 1008000.
On to september they sold 84,000, so the total went down to 924000 and stayed at this until 31 December. So for this part of the year the depreciation is 3/12 x 20% x 924000
The carrying value of a company’s non-current assets was $200,000 at 1 August 20X0. During the year
ended 31 July 20X1, the company sold non-current assets for $25,000 on which it made a loss of
$5,000. The depreciation charge for the year was $20,000. What was the carrying value of non-current
assets at 31 July 20X1?Hi Archana,
For that question, you would need to create NCA account with carrying values.
If there were any Additions or Revaluation surpluses, they would be added to the opening carrying value and depreciation for the year plus carry value of disposal would be deducted to arrive at closing carrying value.In this question they have given opening carrying value, depreciation for the year and carrying values of disposal can be calculated using the proceeds and loss on disposal.
To calculate CV of disposals:
Proceeds – CV = Profit (Loss) on disposal
∴ 25,000 – CV = – 5,000
∴ CV = 30,000So the answer would be:
200,000 – 20,000 – 30,000 = 150,000NCA account with carrying values will be like this:
thank yuh nishan .. 🙂 .. but, why depn is deducted?? NCA ledger account does not include depn isn’t it??
as above ques already says NCA at carrying value 200000, why we need to deduct depn again?
NCA Cost account doesn’t include depreciation.
But when we do Carrying Value or Net Book Value accounts, we need to deduct it. CV(NBV) is arrived at after deducting Accumulated depreciation from the Cost.
The opening 200,000 indicates the CV balance after deducting previous year’s accumulated depreciation. So this years depreciation has to be deducted to arrive at the closing CV balance for this year.
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