Professional Documents
Culture Documents
Depreciation
Depreciation
Subject: Account WS : 1
Topic = Depreciation
Q.1. Jas owns a printing business and has recently incurred various expenditures relating to her premises.
REQUIRED
(a) Complete the table by inserting a tick (3) to show how each item of expenditure should be classified. The first one has
answer. .........................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
.......................................................................................................................................................................
An extract from Jas’s statement of financial position at 31 December 2019 showed the following:
depreciation value
$ $ $
During the year ended 31 December 2020 the following transactions took place. On 1 January 2020 fixtures, $30000, were purchased by cheque. On 30 June 2020
fixtures were sold for $6000, which was received by cheque. These fixtures had originally been purchased on 1 January 2018 for $20000. Jas depreciates fixtures
on a straight-line basis. She assumes fixtures will have a useful life of four years, at which time the residual value will be 10% of original cost. Depreciation is
charged for each part of the year for which the fixtures are owned. REQUIRED (c) Prepare the following accounts for the year ended 31 December 2020. Balance
https://tsge.edu.in/ Page 1 of 12
Provision for depreciation of fixtures account
(d) Prepare the fixtures disposal account for the year ended 31 December 2020.
Jas
https://tsge.edu.in/ Page 2 of 12
Workings :
Q.2. Simon has a business selling office stationery. On 1 January 2019 he owned two delivery vehicles which had been purchased on 1 January 2018.
Delivery vehicle A had cost $30000 and delivery vehicle B had cost $25000.
Simon uses the straight-line method for depreciating the delivery vehicles. A rate of 20% per annum on cost is used, with the rate being applied for each part of the
Due to a decline in business, delivery vehicle B was sold on 31 March 2020 and a cheque for $10350 was received. Delivery vehicle A was still in use at the end of
2020.
REQUIRED
(a) Complete the following accounts for each of the years ended 31 December 2019 and 2020. Balance the accounts at the end of each year where appropriate.
Simon
Provision for
depreciation
of delivery vehicles
account
Delivery vehicles
disposal account
Simon’s sister
Yasmin is also in
business and
vehicles by the
reducing balance
method.
Simon is considering
reducing balance
method of depreciation
to his delivery
vehicles.
Simon whether he
reducing balance
method of
answer. .........................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
https://tsge.edu.in/ Page 3 of 12
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
...................................
Q.3. Sariah owns a business selling ladies’ clothing. She maintains a system of double entry bookkeeping.
REQUIRED
(a) Prepare journal entries to record the above transactions. Narratives are not required.
Sariah
Journal
Sariah is
preparing her financial statements for the year ended 30 September 2020. She provides the following information for fixtures and fittings.
2019 $
2020
Sariah’s policy is to provide depreciation on fixtures and fittings at 10% per annum using the reducing balance method. A full year’s depreciation is charged in the
REQUIRED
(b) Prepare the following accounts for the year ended 30 September 2020. Close the accounts by balancing or by making an appropriate year end transfer.
Sariah
https://tsge.edu.in/ Page 4 of 12
Provision for depreciation of fixtures and fittings account
Disposal account
Sariah is considering forming a partnership with her friend Emy who runs a similar business.
REQUIRED
(c) Advise Sariah whether or not she should form a partnership with Emy. Justify your answer with two advantages and two disadvantages of forming a partnership
with
Emy. ............................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
................................................................................................................................
Q.4. Amelia opened a business on 1 April 2017. On that date she made the following payments by bank transfer.
Premises 100000
REQUIRED
(a) Complete the table by placing a tick (√) in the correct column to indicate whether each payment is capital expenditure or revenue expenditure.
https://tsge.edu.in/ Page 5 of 12
Amelia decided to depreciate her non-current assets using the reducing (diminishing) balance method at the following rates.
REQUIRED
(b) Name one other method of depreciation which Amelia could apply
....................................................................................................................................
(c) Prepare the following accounts for each of the years ended 31 March 2018 and 31 March 2019.
Balance the provision for depreciation of computer equipment account and bring down the balance on 1 April 2018 and 1 April 2019.
Amelia
https://tsge.edu.in/ Page 6 of 12
On 30 September 2019 Amelia sold the office furniture as it was no longer suitable and received $1750 in cash.
REQUIRED
(d) Calculate the total depreciation on the office furniture up to the date of
disposal. .......................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
.........................
furniture. ......................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
..........................
Q.5. Masuma owns a furniture store. She maintains a full set of accounting records. Her financial year ends on 31 March.
1 On 1 April 2017 Amina, a credit customer, owed $160. On 1 March 2018 she paid 75% of this and the balance was written off as a bad debt.
2 On 4 January 2018 additional fixtures and fittings, $2000, were purchased on credit from Office Traders, but this transaction was not recorded.
3 The fixtures and fittings are depreciated at the rate of 20% per annum on the cost of equipment held at the end of each financial year.
4 On 31 March 2018 the discount columns in the cash book showed the following totals for the month:
These totals had not been transferred to the discount accounts in the ledger.
REQUIRED
(a) Record this information in the following accounts in Masuma’s ledger at 31 March 2018.
Some entries have already been made in the accounts during the year.
https://tsge.edu.in/ Page 7 of 12
Masuma
Amina account
Bad debts
account
https://tsge.edu.in/ Page 8 of 12
REQUIRED
Name the account in which the double entry would be made for each item.
..........................................................................................................................................................................................
Double entry..................................................................................................................
Explanation ...................................................................................................................................................................................................................
.........................................................................................................................................................................................
February 1 M6 Vans
Explanation ...................................................................................................................................................................................................................
.........................................................................................................................................................................................
Double entry..................................................................................................................
Explanation
……................................................................................................................................................................................................................................
.......................................................................................................................................................................
Double entry..................................................................................................................
Q.6. Jamil started a business on 1 January 2014. He considered using the straight line (equal instalment) method to depreciate all his non-current assets.
REQUIRED
(a) Name one other method Jamil could use to depreciate his non-current
assets. ..............................................................................................................................
(b) Suggest two reasons why the straight line (equal instalment) method would not be a suitable method of depreciation to apply to the hand tools used in Jamil’s
factory.
1...................................................................................................................................................................................................................................
...................................
2...................................................................................................................................................................................................................................
...................................
Jamil decided to depreciate his office machinery at 20% per annum using the straight line (equal instalment) method calculated on a month-by-month basis from
valuation of $6000.
REQUIRED
(c) Calculate the depreciation on office machinery for the year ended 31 December 2016.
Show your calculations and insert your answers in the spaces provided.
https://tsge.edu.in/ Page 9 of 12
(d)
Calculate the depreciation on office machinery for the year ended 31 December 2017.
Show your calculations and insert your answers in the spaces provided.
(e) Prepare the following accounts in the ledger of Jamil for each of the two years ended 31 December 2016 and 31 December 2017.
Balance the accounts and bring down the balances on 1 January 2017 and 1 January 2018.
Jamil
https://tsge.edu.in/ Page 10 of 12
https://tsge.edu.in/ Page 11 of 12
(f) Calculate the profit or loss on the disposal of office machine
A. .................................................................................................................................................................................................................................
....................................................................................................................................................................................................................................
....................................................................................................................................................... ........................................................
https://tsge.edu.in/ Page 12 of 12