REQUIRED DISPOSAL OF FIXED ASSETS Answer the following questions from the inform
ID: 2329165 • Letter: R
Question
REQUIRED DISPOSAL OF FIXED ASSETS Answer the following questions from the information given below. All workings 2.1 Calculate the depreciation for the current financial year on the vehicle that ws sld 2.2 Prepare the Fixed Asset Realisation account in the general ledger to reflect the 2.3 Calculate the depreciation for the current financial year on the new vehicle acquired 2.4 Calculate the total cost price of the vehicles on 28 February 2017 vehicle on 31 August 2016. to disposal of the 2.5 to reflect all Prepare the Accumulated Depreciation on Vehicles account in the general ledger the entries up to the end of the financial year Prepare the following note to the financial statements (amount column fo 28 February 2017: 2.6 r Vehicles only) as at INFORMATION Steers Enterprises owns a fleet of motor vehicles. The following balances appeared in the general ledger on 01 March 2016, the beginning of the financial year R1 000 000k R400 000 Vehicles at cost Accumulated depreciation on vehicles Additional information - On 31 August 2016, a vehicle that cost R200 000 was sold for R32 000 cash. The accumulated depreciation on this vehicle was R165 000 on 01 March 2016. On 01 December 2016 a new vehicle was purchased for R250 000 cash. Deprecation is provided for on vehicles at 20% per annum on the diminishing balance. aExplanation / Answer
Solution:
Given data,
At the beginning of the year march 01,2016
Vehicles cost 1,000,000
Accumulated depreciation on vehicle 400,000
At the ending of the year august 31, 2016
Cost of vehicle 200,000
Accumulated depreciation on march 01,2106 165,000
Selling price 32,000
Depreciation rate on diminishing balance 20%
Answer for 2.1:
Calculation of depreciation for the current financial year on the vehicle that was sold
Book value of vehicle on march 1,2016 =
Cost of vehicle - Accumulated depreciation
= 200,000 - 165,000
= 35,000
Annual depreciation = Book value of vehicle on march 1,2016 * depreciation rate
= 35,000 * 20%
= 7000
Depreciation expense for six month march-august = Annual depreciation / 2
= 7000 / 2
= 3500
Depreciation for the current financial year on the vehicle that was sold = 3500
Answer for 2.2:
Fixed asset realisation account
Details
Cost of vehicle
Answer for 2.3:
Calculation of depreciation for the current financial year on the new vehicle aquired
Purchase price of new vehicle 250,000
Annual depreciation (0.2 * 250,000) 50,000
Depreciation for the current financial year (3 months) (50,000 / 4) 12,500
Answer for 2.4:
Calculation of total cost price of the vehicles on 28, feb 2017
1 Vehicle at cost (march 1,2017) 1,000,000
2 Cost of vehicle disposed off in august 2016 200,000
3 Cost of new vehicle purchased on dec 1,2016 250,000
4 Total cost price of the vehicles on 28 feb 2017 (4= 1+2+3) 1,050,000
Answer for 2.5:
Accumulated depreciation account on feb 28,2017
Accumulated depreciation on march 1,2016.............................................. 400,000
Depreciation for the year on vehicles available on march 1,2016 ..............120,000
(0.2 * (1000000 - 400,000))
Less: Reduction of depreciation on vehicle sold .................................-3,500
Add: Depreciation of new vehicle ..................................................+12,500
Total accumulated depreciation ............................................................... 529,000
Less: accumulated depreciation removed for sold vehicle ............. -168,500
Accumulated depreciation as on feb 28, 2017 .............................360,500
Details
Debit Credit Cash 32,000 Accumulated depreciation 168,500Cost of vehicle
200,000 Gain on disposal 500Related Questions
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