BUS10250 Financial Accounting Semester B 2019-2020

Written Assignment 2

A company depreciates its equipment at the rate of 20 per cent per annum using the straight line
method, for each month of ownership.

20X4 Bought equipment costing $900 on 1 January

Bought equipment costing $600 on 1 October

20x5 No purchase or sale of equipment

20X6 Bought equipment costing $550 on 1 July

20X7 Sold equipment which cost $900 which was bought on 1 January 20X4 for $275
on 30 September 20X7

The accounting year ended on 31 December each year.

Required:

(a) Draw up the equipment account and the provision for depreciation ── equipment
account for years 20x4, 20x5, 20x6 and 20x7.

(b) What is the profit or loss on disposal of equipment sold on 30 September 20x7.