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Depreciation Examples - 2021 (Example 7 To Example 10)

The document provides financial information and transactions for three different businesses regarding their furniture, motor vehicles, and machinery as of specific dates. It outlines the initial costs, depreciation policies, and required accounts for each business for the respective years. Each example includes details on purchases, sales, and the method of calculating depreciation.

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27 views3 pages

Depreciation Examples - 2021 (Example 7 To Example 10)

The document provides financial information and transactions for three different businesses regarding their furniture, motor vehicles, and machinery as of specific dates. It outlines the initial costs, depreciation policies, and required accounts for each business for the respective years. Each example includes details on purchases, sales, and the method of calculating depreciation.

Uploaded by

sajj6062
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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EXAMPLE 8

Following information is available as at 1 st January 2020 for Miss Katrine’s


business
Furniture and Fittings at Cost $160000
Provision for depreciation on Furniture and Fittings $75000

During the year ended 31st December 2020 , the following transactions took place.

1st July 2020: Bought New Furniture and fixtures for $60000. Additional cost of
installing the furniture was $1500.

1st Oct 2020: Sold an old Furniture for $5500. This was bought on 1 st April 2016
for $20000.

Depreciation Policy:
30% per annum Reducing balance method where full depreciation is charged in
the year of purchased but none is charged in the year of disposal.

Required for the year ended 31st Decemeber 2020:

(a) Furniture and Fittings Account


(b) Provision for Depreciation Account on Furniture and Fittings Account
(c) Disposal Account.
(d) Redraw the Provision for Depreciation Account if Depreciation policy
is 30% per annum reducing balance method but depreciation is
charged according to number of months used.
EXAMPLE 9
Following information is available as at 1 st January 2018 for Mr Bravo’s business

Motor Vehicle at Cost $135000


Provision for depreciation on Motor Vehicle $60000

During the year ended 31st December 2018 , the following transaction took place.

1st Aug 2018: A new motor vehicle costing $40000 was purchased. The cost was
settled by a cheque payment of $25000, the balance by the part exchange of an old
vehicle. The vehicle which was part exchanged had cost $32000 on 1 st Oct 2015.

Depreciation Policy:
25% per annum Reducing balance method where full depreciation is charged in
the year of purchased but none is charged in the year of disposal.

Required for the year ended 31st Decemeber 2018:

(a) Motor Vehicle Account


(b) Provision for Depreciation Account
(c) Disposal Account.
EXAMPLE 10

Following information is available as at 1 st July 2020 for Mr Javeds’s business


Machinery at Cost $650000
Provision for depreciation on Machinery $200000

During the year ended 30th June 2021 following transactions took place.

31st December 2020: Sold an old machinery for $50000 , the original cost of the
machine was $200000 and it was purchased on 1 st October 2017

1st April 2021 : Bought New Machine costing $240000 by cheque.

Deprecation Policy: 20% per annum Reducing Balance method where


depreciation is charged according to number of months.

Required for the year ended 30th June 2021


(a) Machinery at Cost Account
(b) Provision for depreciation on Machinery Account
(c) Disposal Account.
(d) Redraw the Provision for depreciation account if business had a policy to
use 20% per annum Reducing balance method where full depreciation is
charged in the year of purchased but none is charged in the year of disposal.

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