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Hi John
kindly assist on the below1. a company plant and machinery ledger account for year ended 30Sept 2002 as follows
balance (oct 2001) 381200
cash addition(01 Dec) 18000
disposal account assets sold (June2002) 36000
Balance (30Sept) 363200Company to depreciation at 20% per year straight line basis, with apportionate depr in the year of purchase and sale
What si the depr charge for the year ended 30Sept 2002their calculation is : December 18000×20%x10/12
June 36000×8/12×20%
Balance 345200×20%
my problem here is the disposal of 8 months how did they got it, because from June 2002 to 30Sept 2002 is 4 months.2.Business purchased motor car on 1July fo 20000. It is depreciated 20% on straight line basis. Assuming residentil value at the end of 5 years of 4000 with proportionate depreciation charge in the year of purchase.
20000 cost was correctly entered in the cash book but posted to debit of motor vehicles repairs accountHow will the business profit for year ended 31 Dec 2003 be affected by error?
a, understated by 18400
b, overstated by 18400
answer is a, kindly assist me about understament and overstament.3. Asset register shows a netbook value of 271200. However non current assets account in the nominal ledger shows net book value of 251200.
Thedifference could be due not having removed a disposal asset from register which had.
a. disposal proceeds of 30000 and profit a disposal of 10000
b, disposal proceeds of 10000 and net book value of 10000the answer is b.
4. Your firm bought a machine for 5000 on 1Jan 2001 which had expected useful life of 4 years and residentila value of 1000.
the asset was to be depr on straight line basis. The firm policy is to charge depr in the year of disposal. On 31 Dec was sold for 1600
What amount should be entered in 2003 statement of comprehensive income for profit and loss on disposal.
Their calculation is 5000-1000/4=1000
answer is Loss 400(2000-1600)
NBV is 2000
Im not clear about this NBV5, Machine was purchased in 2006 for 64000.It was expected to last for 5 years value of 2000. Deprecition was charged at 50% per annum on reducing balance method. with full years charge in the year of puchase, no depreciation is charge in the year of disposal . The company year end 31 Dec 2006. The machine was sold on 3 April 2000 for 2500.
What was profit and loss on sale.my calculation is 64000-2000/5 years= 12400
6200×50% =3100
3100×50% =1550
1550×50% =775
Profit (2500-775) =1725my answer dont correspond to their answer.
Their answer is 1500.
Regards
Sipho.1. They had owned the disposed of asset for 8 months of the year, and therefore it would be depreciated for 8 months before it was sold.
2. ‘Understated’ would mean that their figure was too low; ‘overstated’ would mean that their figure was too high.
3. (a) would mean that the asset at a net book value of 20,000 (30,000 – 10,000).
(b) states that the asset has a net book value of 10,000.
Since the asset register shows the net book value as being 20,000 too high, the answer must be (a).
If your book shows the answer as (b), then either you have made a mistake copying the question, or your book has an error.4. There is depreciation of 1000 a year for 2001, 2002, and 2003, so 3 years, So the NPB at the date of sale is 5,000 – (3 x 1000) = 2,000.
5. With reducing balance method, any residual value is irrelevant.
The depreciation for eh first year is 50% x 64,000 = 32,000.
For the second year is 50% x 32,000 = 16,000
And so on 🙂Thanks for your response,really apprecite, clear explanation.
Just to be clear for question this 8 months start from which month to which.
Thanks in advance
Hi John
I think I got the answer from October 2001 to May 2002( 8 months)
Thanks.A non-current asset was purchased at the beginning of year 1 for $2,400 and depreciated by 20% per annum using the reducing balance method.
At the beginning of year 4 it was sold for $1,200.
The result of this was:
Best Regards..There is no point in simply typing out a test question and expecting me to provide a full answer. You must have an answer in the same book in which you found the question, and so ask about whatever it is in the answer that you are not clear about – then I will explain.
I do assume that you have watched my free lectures on depreciation because this is actually a very easy question.
The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.At 31 December 20X3 Q, a limited liability company, owned a building that had cost $800,000 on 1 January 20W4.
It was being depreciated at 2% per year.
On 31 December 20X3 a revaluation to $1,000,000 was recognised. At this date the building had a remaining useful of 40 years.
What is the balance on the revaluation surplus at 31 December 20X3 and the depreciation charge in the statement of profit or loss for the year ended 31 December 20X4.
Explain this question
What is it that you want explaining? You must have an answer in the same book in which you found the question and so say what it is in the answer that you are not clear about and then I will explain.
I do assume that you have watched my free lectures on depreciation and on limited companies.
Machinery will from
2011 be depreciated at 20% per annum, using the reducing balance
method.
At 31 December 2010 the machinery account was as follows:
$
Cost 100 000
Accumulated depreciation 50 000
Carrying amount 50 000
No machinery was bought or sold in 2010.Required
(a) Calculate deprecation for the year ended 31 December 2011.
(b) Calculate depreciation for the years 2012 and 2013Please do not simply type out full questions and expect to be provided with a full answer.
You must have an answer in the same book in which you found the question and so ask about whatever it is in the answer that you are not clear about.
It seems that you have not watched my free lectures on depreciation because this is the most basic depreciation question you could be asked. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
2.Business purchased motor car on 1July fo 20000. It is depreciated 20% on straight line basis. Assuming residuel value at the end of 5 years of 4000 with proportionate depreciation charge in the year of purchase.
20000 cost was correctly entered in the cash book but posted to debit of motor vehicles repairs account.
I’ve checked the answer of this exercise
The depreciation understated: ((20000-4000)*20%*6/12)=1600
But why we need to deducted its residuel(4000)20% straight line depreciation is the same as straight line depreciation over 5 years.
With straight line depreciation over 5 years, the depreciation charge each year is: (the initial cost less the expected sale proceeds) / 5. Because it is proportional depreciation in the year of purchase is will only be 6/12 of the annual charge.
I do explain all of this in my free lectures on deprecation. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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