DEPRECIATION - CHALLENGING QUESTION

On 1st November 2005, we purchased two motor vehicles valued at $28,160 each for cash. nstallation e!penses amounted to $5"# for each of these machines. t was decided to depreciate the assets usin$ diminishin$ balance at 16%. On &0th 'eptember 2006, we bou$ht a new (otor )ehicle for $&# 210 from (otor *raders on credit. *his asset will be depreciated usin$ diminishin$ balance method at 12 .5%. On 1st +ebruar, 200- two of the machines bou$ht in November were replaced b, a new model worth $#0,1#0. .e received $15,620 on the trade/in for each machine. *he new asset is to be depreciated usin$ the strai$ht line method and has a residual value of $8,000 and an estimated life of 6 ,ears. t was decided at this sta$e also to insure all the assets at $##0 each. You are required to show: 0ed$er 1ccounts, 2rofit and 0oss 1ccounts 3 2006, 200-, 4alance 'heet 5!tracts 3 2006, 200NUMBE R OF MONTH S

DATE 1/11/2005 30/6/2006

ASSET 1 25600+54 0 26140 8/12 x 26140 x . 16 2788 7/12 x ((261402788 x . 16 2180

ASSET 2 26140

ASSET 3

ASSET 4

DEPREC

PROFIT & LOSS

DISPOSAL

2788

5576

5576

30/9/2006 1/2/2007

31100 7 2180 36491 (364918000/6 x 5/12 1979 2180+2180 4360 2788+2788 +2180+218 0 9936 4360+4895 9255

1/2/2007 30/6/2007

9/5

9/12 x 31100x . 125 2916

2916+1979 4895