1.3. Accounting for non-current assets
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
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Clarissa started her business on 1 July 2022, and she is preparing her financial statements for the year ended 30 June 2024. She depreciates her motor vehicles at 25% per annum using the straight-line method. Depreciation is charged on a monthly basis. She purchased a motor vehicle on 1 July 2022 costing $24 000. She estimated that the motor vehicle would have a useful life of four years with no residual value. On 30 September 2023 she purchased a new motor vehicle costing $70 000. The old motor vehicle was part-exchanged at a value of $14 800. The balance was settled with an interest-free loan repayable in equal monthly instalments over two years. The first loan instalment was due to be paid on 31 October 2023. She estimated that the new motor vehicle would have a useful life of four years with a residual value of $16 000. Prepare each account for the year ended 30 June 2024. Motor vehicle at cost account Date Details $ Date Details $ Motor vehicle provision for depreciation account Date Details $ Date Details $ Calculate the outstanding balance on the interest-free loan at 30 June 2024. State how the interest-free loan would be shown in the statement of financial position at 30 June 2024. Additional information Clarissa has been advised that she should consider charging depreciation on the reducing balance method rather than the straight-line method. Advise Clarissa whether or not she should change her method of charging depreciation. Justify your advice by discussing both methods.
9706_w24_qp_21
THEORY
2024
Paper 2, Variant 1
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Questions Discovered
480