1.3. Accounting for non-current assets
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
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V Limited owns various non-current assets. Non-current assets depreciate due to a number of factors including wear and tear. REQUIRED State two reasons, other than wear and tear, why non-current assets depreciate. Additional information Businesses must apply the consistency concept when accounting for depreciation. REQUIRED Describe the consistency concept. Additional information The company’s financial year ends on 31 December. Property was purchased on 1 January 2019 at a cost of $850 000. Property is depreciated at 5% per annum on cost. On 1 January 2021 the directors decided to revalue the property at $1 200 000. REQUIRED Prepare the journal entry to record the revaluation of the property. A narrative is not required. Journal Dr $ Cr $ Additional information Furniture and equipment was purchased on 1 January 2019 at a cost of $140 000. Furniture and equipment is depreciated at 10% per annum using the reducing balance method. On 1 September 2021, the directors sold furniture and equipment which had cost $21 000 on 1 January 2019. A full year’s depreciation is charged in the year of purchase but none in the year of disposal. REQUIRED Calculate the charge for depreciation of furniture and equipment for the year ended 31 December 2021. Additional information Motor vehicles were purchased on 1 January 2020 at a cost of $84 000. Motor vehicles are depreciated at 20% per annum using the reducing balance method. On 1 November 2021, a new motor vehicle was purchased at a cost of $44 000. A cheque for $17 000 was paid for the vehicle and the balance was covered by the part-exchange of a vehicle which had cost $40 000 on 1 January 2020. A full year’s depreciation is charged in the year of purchase but none in the year of disposal. REQUIRED Prepare the motor vehicle disposal account for the year ended 31 December 2021. Motor vehicle disposal account $ $
9706_s22_qp_22
THEORY
2022
Paper 2, Variant 2
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480