4.2. Accounting for depreciation and disposal of non-current assets
A subsection of Accounting, 7707, through 4. Accounting procedures
Listing 10 of 32 questions
A company has a fleet of delivery vehicles. Information from their statement of financial position at 31 December 2022 shows that the vehicles originally cost $440 000 with accumulated depreciation of $270 000. The business purchased two additional vehicles costing a total of $70 000 on 1 April 2023 on credit from L Autos. On 30 November 2023, the business sold one of its vehicles. The vehicle had originally cost $28 000 with accumulated depreciation of $16 800. The vehicle was sold for $10 500 to a local garage who paid by bank transfer. The business provides for depreciation using the straight-line method at a rate of 20% per annum. A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the year of disposal. REQUIRED: Calculate the depreciation charge for the year ended 31 December 2023. Prepare the company’s ledger accounts for the delivery vehicles, provision for depreciation and disposal of delivery vehicles for the year ended 31 December 2023. Balance the accounts and bring down the balances on 1 January 2024. Delivery vehicles account Date Details $ Date Details $ Provision for depreciation of delivery vehicles account Date Details $ Date Details $ After talking to his accountant, the owner of the company is considering changing the method of depreciation for his delivery vehicles to the reducing balance method but maintaining the rate of depreciation at 20% per annum. REQUIRED: Advise the owner of the company whether he should pursue this course of action. Justify your answer by providing two advantages and two disadvantages of changing the method of depreciation to the reducing balance method. Complete the following table by placing a tick (3) in the appropriate column to indicate the most suitable method of depreciation for each of the non-current assets. Non-current asset Straight-line Revaluation No depreciation Land Fixtures & fittings Loose tools
7707_w24_qp_23
THEORY
2024
Paper 2, Variant 3
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Rashid provided the following balances at 31 December. $ machinery at cost 52 000 provision for depreciation of machinery 23 000 Depreciation for the year was calculated at 20% on cost and is included in the balance for the provision. After the balances had been extracted, it was found that machinery repairs costing $2000 had been debited in error to the machinery account. What is the correct balance on the provision for the depreciation of machinery account?
7707_s23_qp_11
MCQ
2023
Paper 1, Variant 1
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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 $30 000 and delivery vehicle B had cost $25 000. 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 year for which the delivery vehicles are owned. Due to a decline in business, delivery vehicle B was sold on 31 March 2020 and a cheque for $10 350 was received. Delivery vehicle A was still in use at the end of 2020. REQUIRED 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 Delivery vehicles account Date Details $ Date Details $ Jan 1 Balance b/d 55 000 Delivery vehicles disposal account Date Details $ Date Details $ Simon’s sister Yasmin is also in business and depreciates her delivery vehicles by the reducing balance method. Simon is considering whether to apply the reducing balance method of depreciation to his delivery vehicles. REQUIRED Advise Simon whether he should apply the reducing balance method of depreciation. Justify your answer.
7707_w21_qp_22
THEORY
2021
Paper 2, Variant 2
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Questions Discovered
32