1.3. Accounting for non-current assets
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 480 questions
Richard commenced business on 1 May 2011. At the end of the first year of trading an extract from his statement of financial position showed: Non-current assets Cost $ Accumulated Depreciation $ Net book value $ Freehold land and Buildings 100 000 2 000 98 000 Machinery 64 000 16 000 48 000 Motor vehicle 12 000 3 600 8 400 Richard has a policy to depreciate non-current assets as follows: • Buildings at 2% per annum on cost. • Machinery at 25% per annum on cost. • Motor vehicles at 30% per annum using the reducing balance method. • Depreciation is charged for each month of ownership. On 1 August 2012 additional machinery, costing $18 000, was purchased. On 1 January 2013 a new motor vehicle costing $24 000 was purchased. On the same date the old motor vehicle was traded in. Richard received an allowance of $2 600 against the cost of the new vehicle. The vehicle disposed had originally cost $12 000 and was purchased on 1 May 2011. All payments and receipts for purchases and disposals were in cash. REQUIRED Prepare the following ledger accounts for the year ended 30 April 2013. Dates are not required. Motor vehicles (at cost) Provision for depreciation of motor vehicles Disposal of motor vehicles Calculate the depreciation charge for the year ended 30 April 2013 to be shown in the income statement, clearly identifying the amount charged for each category of asset. Additional information Richard is considering the admission of a partner and feels that he should be rewarded for his efforts in starting and developing the business. His accountant has advised him that there is an asset called goodwill. REQUIRED Explain the meaning of the term goodwill and suggest two reasons how it may arise. Explain how goodwill should be treated in the books of partnership.
9706_s14_qp_21
THEORY
2014
Paper 2, Variant 1
View
Bradley, a sole trader, provided the following information for the year ended 31 March 2014. $ Revenue 420 000 Opening inventory 40 000 The rate of mark up is 40%. The rate of inventory turnover is 5 times per annum. REQUIRED Explain what is meant by mark up. Prepare the trading section of the income statement for the year ended 31 March 2014. Workings: State the formula for calculating margin. Additional information At 31 March 2014, the net book value of the non-current assets was $550 000. REQUIRED Explain what the non-current asset turnover measures. State the formula to calculate the non-current asset turnover ratio. Calculate the non-current asset turnover ratio correct to two decimal places. Ratio Formula Calculation non-current asset turnover Explain why a provision for doubtful debts may be necessary. Additional information Bradley provides for doubtful debts at the rate of 4%. The provision for doubtful debts at 1 April 2013 was $1650. Trade receivables at 31 March 2014 were $35 000. REQUIRED Prepare Bradley’s provision for doubtful debts account for the year ended 31 March 2014. State how the provision for doubtful debts is shown in: income statement statement of financial position
9706_s15_qp_21
THEORY
2015
Paper 2, Variant 1
View
Khalid owns a wholesale business selling electrical goods. He does not keep proper books of account, but is able to provide the following information. Balances at 1 January 2014 $ Motor vehicle at cost 38 400 Motor vehicle provision for depreciation 12 600 Fixtures and fittings at cost 41 940 Fixtures and fittings provision for depreciation 22 680 Trade receivables 26 610 Trade payables 19 920 Inventory 33 500 Prepayment of two months’ property rental 3 750 General expenses accrued Cash in hand Summary of bank account for the year ended 31 December 2014 Dr Cr $ $ Balance at 1 January 2014 Payments to credit suppliers 134 750 Receipts from credit customers 200 270 Drawings 22 185 Cash sales banked 9 675 Property rental 20 625 Balance at 31 December 2014 11 295 General expenses 6 650 Purchase of motor vehicle 10 100 Wages and salaries 26 150 Motor expenses 4 890 225 350 225 350 REQUIRED Calculate Khalid’s opening capital at 1 January 2014. Additional information For the year ended 31 December 2014: Credit sales $193 400 Cash sales $15 180 Trade payables at 31 December 2014 were $21 590. All sales are made at 30% gross profit margin. REQUIRED Calculate the following for the year ended 31 December 2014. Sales revenue Purchases Calculate the value of closing inventory at 31 December 2014. Additional information Before banking his receipts from cash sales, Khalid took $400 per month for his personal drawings. The only other cash payments during the year were for motor expenses. Cash in hand at 31 December 2014 was $460. REQUIRED Prepare the cash account for the year ended 31 December 2014 to identify the cash payment made for motor expenses. Additional information Khalid allowed a total of $914 discount to credit customers. 2 Motor vehicles are depreciated at 25% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase, but none in the year of sale. During the year, a motor vehicle that had cost $16 000 on 1 July 2012 was traded in for $8200. The balance of the purchase price for the new vehicle was paid by cheque. Fixtures and fittings are depreciated at 15% per annum using the reducing balance method. There were no additions or sales of fixtures and fittings during the year. There was no accrual for general expenses at 31 December 2014. Prepaid rent at 31 December 2014 was $1875. REQUIRED Prepare Khalid’s income statement for the year ended 31 December 2014.
9706_s15_qp_22
THEORY
2015
Paper 2, Variant 2
View
The table shows extracts from the statements of financial position of a business. $ $ non-current assets (at cost) 190 000 245 000 less accumulated depreciation 75 000 90 000 net book value 115 000 155 000 Other information for the financial year 2015 is as follows. $ depreciation charged 40 000 new non-current assets purchased (at cost) 105 000 loss on sale of non-current assets 10 000 Which amount was received from the sale of the non-current assets?
9706_s16_qp_11
MCQ
2016
Paper 1, Variant 1
View
A business purchased a motor vehicle on 1 January 2012 for $24 000. The estimated useful life of the motor vehicle was four years and the estimated residual value at the end of four years was $8000. The business depreciates motor vehicles at 25% per annum using the reducing balance method. No depreciation is charged in the year of disposal. The motor vehicle was sold on 31 July 2015 for $12 000. What was the profit on the sale of the motor vehicle?
9706_s16_qp_12
MCQ
2016
Paper 1, Variant 2
View
Questions Discovered
480