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Dear John ,
I have 2 questions about depreciations . Can you pls help me to fix the answer if it’s wrong ? Thanks
The 1st question is :
Your firm bought a machine for 50,000$ on 1 January 20×2 , which had an expected useful life of 4 years and an expected residual value of 1,000$ , the asset was to be depreciation on the straight-line basic . The firm ‘s policy s to charge dep’n in the year of disposal . On 31 December 20×3 , the machine was sold for 1,600$ . What amount should be entered in the 20×3 statement of profit or loss and other comprehensive income for profit or loss on disposal ?
My answer :
Dep’n expense : 5000- 1000/ 4 = 1000$
1st year :
Income stat : Dep’n expense (12/12 x 1000) 1000Financial statement
Balance sheet
Non- current asset
Machine : cost 5000$
Less Dep’n 1000$
4,000
2nd year
Income Statment ; Dep’n expense $1,000
Balance Sheet
Machine ; Cost $5,000
Less ; Accumulated dep’n $2,000
$ 3,0003rd year
Income Statement ; Dep’n expense 1,000$
Balance sheet
Machine cost $5,000
Less Accumulated dep’n $3,000
$2,000On Dec 31 the machine sold for 1,600$
Calculate Dep’n expense 12/12×1000$=1,000$On Accumulated Dep’N Account
DR Disposal $3,000
CR Balance $2,000
CR Dep’n expense $1,000On Disposal Account
DR Machine account $5,000
CR Accumulated Dep’n $3,000
Cash $1,600
Income Statement-Loss on sale $400Is My answer correct ? , and the amount of the income statment in the disposal amount always be ” A Loss for sale” ? Because I did some the dep’n .its alway come to Loss . Thank you
The 2nd questions :
An asset register showed a carrying value of $67,460 . A non-current asset costing $15,000 had been sold for $4,000 , making a loss on disposal of $1,250 . No entries had been made in the asset register for this disposal , What’s the correct balance on the asset register ?
My answer :On Disposal account :
DR car account 15,000$
CR cash $4,000
CR Loss 1,250$
So the Accumulated Dep’n will be (9,750$ )On Accumulated Dep’n account
DR Balance $67,460
And after this I don’t know how to do . Can you pls help me . Thanks a lotFirst question: Your answer is correct if the original cost was 5,000 (you typed 50,000).
However you must not write down the position each year in the exam – it takes far too long and is not needed. There is a lot of time pressure in the exam and you will not have time to do it.Second question:
The t-accounts and the double entries are not at all relevant.
The carrying value was 67460The asset sold had a carrying value of 5450 (4000 + 1250)
Therefore the carrying value after the sale is 67460 – 5450 = 62010
(I am puzzled that you have the questions but have not been able to check the answers. Are there not answers in the same book as the questions? If there are not then you should use a different book 🙂 )
Dear John ,
There are questions in book before . But I tear those papers already ( I start to regret now 🙁 ) , I’m afraid of looking the answers before completing the questions by myself .
According to your lecture , I can be able to complete some questions , because this is just my beginning , so I have to write all ( what you taught ) to remember what is it and where its position . I know it’s too long and take a lot of time ( it took me nearly an hours for 2 questions ) But When It comes into my head , then I won’t write down all .
By the way , can you pls answer my question in the first part ? In the income statement . The disposal amount always be ” A loss of sale ” ? Thanks a lotNo – it will not always a loss on sale, it can be a profit on sale.
If the sale proceeds are less than the carrying value (net book value) then there is a loss on sale. If the same proceeds are more than the carrying value (net book value) then there is a profit on sale.
Dear Sir,
Pls help me with the following question:
On 1st January 2012, Joffa purchased a new machine at cost of $96720. Delivery cost were $3660 & internal administration cost of $9450 incurred. At that time Joffa planned to replace the machine in 5 years, when it would have no value and to depreciate the machine on straight line basis.
Joffa decides on 1/1/2014 that the machine has only 1 remaining year of useful life. There is no expected change to the residual value at the end of its useful life.
What is the depreciation expense in respect of this machine for the year ended 31/12/2014?
A. $ 33460
B. $ 58032
C. $ 60228
D. $ 65898The answer to this question is C. With workings : 2 * 1/5 ( 96720 + 3660 ) = $ 40152
Resulting with answer $ 60228.My calculation to this question is : Total cost of NCA $100380 ( 96720 + 3660). Initial Dep’n = 100380 / 5 yrs. = 20076. NBV = 100380 – 20076 = $ 80304.
I’m confused at this point of the calculation.
My question to this problem is how did the calculation of 1/5 occur when the remaining useful life on 2014 resulted of only 1 year?
I’d really appreciate it if u kindly explain it to me as there is no explanation to this question.
Thanks so much for helping.
The NBV at 1 Jan 2014 is 100380 – (2 x 20076) = 60227
There were 2 years of depreciation – 2012 and 2013.
where did you get the 5450? i get 5250
@johnmoffat said:
First question: Your answer is correct if the original cost was 5,000 (you typed 50,000).
However you must not write down the position each year in the exam – it takes far too long and is not needed. There is a lot of time pressure in the exam and you will not have time to do it.Second question:
The t-accounts and the double entries are not at all relevant.
The carrying value was 67460The asset sold had a carrying value of 5450 (4000 + 1250)
Therefore the carrying value after the sale is 67460 – 5450 = 62010
(I am puzzled that you have the questions but have not been able to check the answers. Are there not answers in the same book as the questions? If there are not then you should use a different book 🙂 )
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