Class Illustration – Buzzy Trading (modified)

On 31 December 2014, Buzzy Trading’s ledger contained the following accounts:

Motor vehicles RM180,000

Accumulated depreciation RM54,000

The company uses the straight-line method of depreciation at the rate of 20% per annum.
The company provides depreciation on the non-current assets based on strict time basis.

The following are transactions which took place during the year in 2015:
1 April Purchased a second motor vehicle for RM20,300 paying by cheque. This
amount included road tax of RM300
30 Nov Traded-in an old motor vehicle for a new one. This old motor vehicle which
was bought on 1 January 2013 for RM15,000, was traded-in for RM7,000.
This trade-in amount is to be set-off against the cost of the new motor vehicle.
The balance of the cost of the new motor vehicle of RM55,000 is paid by
cheque

Required:

(a) For the financial year ending 31 December 2015, prepare the following ledger accounts:
• Motor vehicles account
• Accumulated depreciation account
• Disposal account

(b) Show extracts of the SOPL for the year ended 31 December 2015 and SOFP as at that
date.

[Note: Road tax amount of RM300 is part of revenue expenditure.]

 Motor Vehicles Account
RM RM
1.1.2015 Bal b/d 180,000 30.11.2015 Disposal 15,000
1.4.2015 Bank 20,000
30.11.2015 Bank 55,000 31.12.2015 Bal c/d 247,000
30.11.2015 Disposal 7,000

262,000 262,000
1.1.2016 Bal b/d 247,000

Accumulated Depreciation Account

RM RM
30.11.2015 Disposal 8,750 1.1.2015 Bal c/d 54,000
31.12.2015 Bal c/d 85,033 31.12.2015 SOPL - Dep 39,783

93,783 93,783
1.1.2016 Bal b/d 85,033

Disposal Account for Motor Vehicle

RM RM

Working 1:
Accumulated depreciation for motor vehicle bought on 1.1.2013 and sold on 30.11.2015:
 Financial year end RM

31.12.2013 15,000 × 20% = RM3,000

31.12.2014 15,000 × 20% = RM3,000

31.12.2015 15,000 × 20% × 11/12 = RM2,750

Total RM8,750

Working 2:
Depreciation expense for financial year ended 31.12.2015:
RM
Non-current assets held for [RM180,000 – 15,000] × 20% = RM33,000
the whole year
Motor vehicle disposed of 15,000 × 20% × 11/12 = RM2,750
on 30.11.2015
Motor vehicle acquired on 20,000 × 20% × 9/12 = RM3,000
1.4.2015
Motor vehicle acquired on [(55,000 + 7,000) × 20% × 1/12] = RM1,033
30.11.2015
Total RM39,783

Extract of SOPL for the year ended 31 December 2015

RM
Other income:
Gain on disposal

Operating expenses:
Depreciation expense
Motor vehicle expense (road tax)

Extract of SOFP as at 31 December 2015

RM

Non-current assets

Motor vehicles

Less: Accumulated depreciation

Net book value