Depreciation

Question 1
On 1 April 2021 Lynn purchased two motor vehicles for business use on credit from Villa Motors Limited. The
vehicles cost $12,000 each.
Depreciation is charged on the motor vehicles at 20% per annum by the diminishing (reducing) balance method.
A full year’s depreciation is charged in the year of purchase but no depreciation is charged in the year of sale.
On 23 January 2023 one of the motor vehicles was sold for $6,500.
Required
(a) Show the journal entry to record the purchase of the motor vehicles on 1 April 2021.
Dates and narratives are not required.
Journal
2021 Dr Cr
$ $

(b) Prepare the provision for depreciation account for the years ended on 31 March 2022 and 2023.
Provision for Depreciation account
Date Details $ Date Details $

(c) Prepare the disposal account.

Disposal account
Date Details $ Date Details $
Question 2
Reddit is in business. His financial year ends on 30 April. He depreciates his non-current assets each year.
On 1 May 2023 the balances in Reddit’s ledger included the following:
$
Equipment at cost 8,600
Provision for depreciation of equipment 3,260
The equipment is being depreciated at 20% per annum using the straight line method, calculated from the date
of purchase. No depreciation is to be charged in the year of disposal.
On 31 October 2023 equipment which had cost $2,000 on 1 May 2021 was sold for $750 cash.
On 1 November 2023 equipment costing $3,400 was purchased on credit from New4U.
Required
Write up the following accounts in the ledger of Reddit for the year ended 30 April 2024.
Balance the accounts where necessary and bring the balances down on 1 May 2024.
Reddit
Equipment account
$ $

Provision for depreciation of equipment account

$ $

Disposal of equipment account

$ $
Question 3
Colour Manufacturing provided the following information at 1 June 2017.
Machinery – Cost $18,100
– Accumulated depreciation $ 8,350
On 1 January 2018 a machine was sold for $3,000 cash. The machine was purchased on 1 September 2015 for $6,600
On 1 March 2018 a new machine costing $9,900 was purchased.
Depreciation is charged for each month of ownership at 20% per annum on a straight line basis.
(a) Calculate for the machine disposed of:
(i) the total amount of depreciation charged

(ii) the profit or loss on disposal.

$ $

(b) Calculate the total depreciation charge on machinery for the year ended 31 May 2018.
$ $

(c) Prepare an extract of the statement of financial position at 31 May 2018 showing machinery only.
Colour Manufacturing
Statement of financial position at 31 May 2018