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FIXED ASSETS & DEPRECIATION 4E5N.2.1 SUGGESTED ANSWERS Question 1 Provision for Depreciation of Motor Vehicles Account 2011 $ Bal c/d 10,000 Dec 31 Profit and Loss Account 2012 18,000 Jan 1 Dec 31 18,000

2011 Dec 31 2012 Dec 31

$ 10,000

Disposal

Bal b/d Profit and Loss Account (20% x [50,000-10,000])

10,000 8,000 18,000

(Half mark for name of account, half mark for each correct entry and working) (b) Loss on disposal = NBV - Selling Price [1] = $[50,000 - 18,000] - $15,000 = $(32,000 - 15,000) = $17,000 [1] Net profit and fixed asset values would be understated. [1 mark each, total 2 marks]

(c)

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Question 2 Motor Vehicles $ 2011 90,000 May 1 Disposal (1) 2012 35,000 Jun 30 Bal c/d (1/2) 125,000 95,000 Provision for Depreciation $ 2011 Jul 1 Bal b/d (1/2)

2011 Jul 1 2012 May 1 Jul 1 2012 May 1

$ 30,000 95,000 125,000

Bal b/d (1/2) Cash (1/2) Bal b/d (1/2)

$ 30,000

Disposal (1 1/2) 10% x 30K + 10% x 27K + 10% x 24.3K Bal c/d (1/2)

8,130 29183 2012 Jun 30 P & L (2) 10% x [60k ( 30k 8130)] + 10% x 35k 37,313 2010 Jul 1 Disposal 2012 May 1 Jun 30 30,000 Provision (1/2) Bank (1/2) P & L (1/2) Bal b/d

2012 Jun 30

7,313 29 183 30 183 (1/2)

2012 May 1 Motor vehicles (1/2)

$ 8130 10000 11,870 30,000

30,000

Reducing balance method is used for fixed assets which depreciate more in the early years and which may be sold before the end of their expected life. (1) A higher depreciation charge is made in the early years and less in later years. (2) CLEMENTI WOODS SEC 4E5N PRELIM P2 Q2 2008

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Question 3

Date 2011 Dec 31

Particulars Balance c/d

Provision for Depreciation of Machinery Amount Date Particulars 2011 25 200 Jan 1 Bal b/d (20%x70000) Dec 31 Depreciation 20%(70000-14000)

Amount 14 000

11 200

25 200 2012 1-Jul Disposal (#2) Balance c/d 12 600 19 080 31 680 2012 Jan 1 Dec 31 2013 Jan 1 Balance b/d Depreciation (#1)

25 200 25 200 6 480 31 680 17 080

Balance b/d Working: #1 Depreciation expense for 2010 = Depreciation on new machine (12 months) + Depreciation on remaining machine (12 months) = 20% (10000)+ 20% (35000 - 7000 - 5600) = $6480

[6]

#2 TOTAL depreciation on disposed machine = 14000/2 + 11200/2 = $12600

Date 2012 Jul 1 Dec 31

Particulars Machinery Gain on Disposal

Disposal of Machinery Account Amount Date Particulars 2012 35 000 Jul 1 Prov for depreciation 600 Bank 35 600

Amount 12 600 23 000 35 600 [3]

(c) (d)

Two other methods of depreciation: Straight line method & Revaluation method Reasons for charging depreciation: * to match cost of fixed asset 'used up' against the revenue it helps to generate (matching concept) * to show the cost of asset at net book value so as not to overstate the asset value (prudence concept)

[2]

[1]

[1]

ST GAB SEC 5NA PRELIM P2 Q2 2008

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Question 4 Machinery 500,000 Nov 1 Disposal 45,000 Dec 31 Balance c/d 545,000 495,000 Provision for Depreciation 13,550 Jan 1 Balance b/d 109,305 Dec 31 Profit and Loss 10%x(495k-66.4k) 122,855 Jan 1 Disposal 50,000 Nov 1 Balance b/d

Jan 1 Oct 30

Balance b/d Bank

50,000 495,000 545,000

Jan 1

Balance b/d

Nov 1 Dec 31

Disposal(W1) Balance c/d

80,000 42,855 122,855 109,305

Nov 1

Machinery

Provision for depreciation Bank Profit and Loss

13,550 32,000 4,450 50,000

50,000 (W1) Depreciation in 2009 = 10%x(500k-0) = 5,000 Depreciation in 2010 = 10%x(500k-5k) = 4,500 Depreciation in 2011 = 10%x(500k-9.5k) = 4,050 Accumulated depreciation = $13,550

YIO CHU KANG SEC 4E5N PRELIM P2 Q4 2008

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Question 5 a. Date 2010 Jan 1 2011 Jan 1 2012 Jan 1 Jun 30 Particulars Bank Balance b/d Balance b/d Bank Balance b/d b. Date 2010 Dec 31 2011 Dec 31 Particulars Balance c/d Balance c/d Provision for Depreciation Account Amt $ Date Particulars 2010 15000 Dec 31 Profit and Loss 2011 28500 Jan 1 Balance b/d Dec 31 Profit and Loss 28500 2012 9500 Jan 1 Balance b/d 32600 Dec 31 Profit and Loss 42100 2011 Jan 1 Balance b/d Amt $ 15000 15000 13500 28500 28500 13600 42100 32600 Delivery Vehicle Account Amt $ Date Particulars 2010 150000 Dec 31 Balance c/d 2011 150000 Dec 31 Balance c/d 2012 150000 Jun 30 Disposal 55000 Dec 31 Balance c/d 205000 155000 Amt $ 150000 150000 50000 155000 205000

2012 Jun 30 Dec 31

Disposal Balance c/d

c. Date 2012 Jun 30 Particulars Delivery Vehicle Disposal of Delivery Vehicle Account Amt $ Date Particulars 2012 50000 Jun 30 Provision for Dep Adler Pte Ltd Profit and Loss 50000 Amt $ 9500 40000 500 50000

d. Straight-line method Revaluation method FAJAR SEC 4E5N PRELIM P2 Q3 2008

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Question 6 a) 2011 Jan 1 Machinery Pte Ltd 2012 Jan 1 Balance b/d Jun 30 Cash 2008 Jan 1 Balance b/d Machinery Account $ 2011 30 000 Dec 31 Balance c/d 2012 30 000 Jun 30 Machinery Disposal 17 000 Dec 31 Balance c/d 47 000 32 000

$ 30 000 15 000 32 000 47 000

b)

Provision for Depreciation of Machinery Account 2011 $ 2011 Dec 31 Balance c/d 3 000 Dec 31 Profit and Loss 2012 2012 Jun 30 Machinery Disposal 1 500 Jan 1 Balance b/d Dec 31 Balance c/d 4 550 Dec 31 Profit and Loss 6 050 2008 Jan 1 Balance b/d Machinery Disposal Account $ 2012 15 000 Jun 30 Provision for Depreciation Cash Profit and Loss (Loss on _____ disposal) 15 000

$ 3 000 3 000 3 050 6 050 4 550

c) 2012 Jun 30 Machinery

$ 1 500 8 000 5 500 15 000

d) Monetary concepts states that only items that can be measured in terms of dollars and cents can be recorded in the books e) General Journal f) Because it is money associated with buying fixed assets for use in the business g) materiality concept unlikely to make a difference to decision making .

GREENRIDGE SEC 4E5N PRELIM P2 Q2 2008

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Question 7 (a) 2012 Apr 10 Disposal Dec 31 Bal c/d Provision for Depreciation on Machinery and Equipment $ 2012 18 000 [1] Jan 1 Bal b/d 10 000 [] Dec 31 Depreciation 28 000 2013 Jan 1 Bal b/d $ 23 000 [1] 5 000 [1] 28 000 10 000 []

2012 Apr10 Disposal

Provision for Depreciation on Motor vehicles A/C $ 2012 7 000 [1] Jan 1 Bal b/d Dec 31 Depreciation 7 000

$ 2 500 [1] 4 500 [1] 7 000

(b) 2012 Apr 10 Machinery and Equipment Disposal of Machinery and Equipment $ 2012 40 000 [] Apr 10 Provision for Depreciation Bank P & L A/C 40 000 $ 18 000 [] 19 500 [] 2 500 [] 40 000

2012 Dec 31 Motor vehicles P & L A/C

Disposal of Motor vehicles A/C $ 2012 25 000 [] Dec 31 Provision for Depreciation 400 [] Bank 25 400

$ 7 000 [] 18 400 [] 25 400

(c)

To spread the cost of the fixed asset over its useful life. By doing this we follow the ( matching concept. We match the depreciation charges each year with the income in future [2] a periods. In some cases, depreciation depends more on passing of time rather than use. Benefits declines (ii) ) ( approximately equal each year the straight line method [1] amay be used here.(e.g. Premises, Furniture) ) In other cases, operating efficiency decreases over life of the asset, therefore the revenue contributions would also be decreasing the reducing balance method could be used here (e.g. Office Equipment, Motor Vehicles) [1] (i) NAVAL BASE SEC 4E5N PRELIM P2 Q2 2008
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Question 8 (a) Machinery Account 2010 $ Jan 1 Ryan Trading Ltd 20 000 2011 Jan 1 Balance b/d 20 000 2012 Jan 1 Balance b/d 20 000 Oct 31 Bank 12 000 32 000 2013 Jan 1 Balance b/d 22 000

2010 Dec 31 2011 Jan 1 2012 Oct 31 Dec 31

Balance c/d Balance c/d Machinery Disposal Balance c/d

$ 20 000 20 000 10 000 22 000 32 000

(b)

Provision for Depreciation of Machinery Account $ 2010 2 000 Dec 31 Profit and Loss 2011 3 800 Jan 1 Balance b/d Dec 31 Profit and Loss 3 800 2012 2012 Oct 31 Machinery Disposal 1 900 Jan 1 Balance b/d Dec 31 Balance b/d 3 910 Dec 31 Profit and Loss 5 810 2013 Jan 1 Balance b/d 2010 Dec 31 Balance c/d 2011 Dec 31 Balance b/d Machinery disposal Account $ 2012 10 000 Oct 31 Provision for Depreciation Cash _____ Profit and Loss 10 000

$ 2 000 2 000 1 800 3 800 3 800 2 010 5 810 3 910

(c) 2012 Oct 31 Machinery

$ 1 900 6 500 1 600 10 000

CHONG BOON SEC 4E5N PRELIM P2 Q2 2008

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Question 9 a Annual depreciation = [6700-700] /4 = 1500

[1m] Provision for depreciation a/c Cr 2010 1500 31-Dec To Profit and Loss [1] 2011 1-Jan Bal b/d 31-Dec To Profit and Loss [1]

Dr 2010 31-Dec Bal c/d [1] 2011 31-Dec Balc/d [1]

1500

3000

1500 1500 3000

3000 2012 31 Oct Disposal [1] (1500 x 3) Bal c/d [1] 2012 1-Jan Bal b/d 31-Dec Profit and Loss [1] [1500+ 10%x8500] 2013 1-Jan Bal b/d

4500 850 5350

3000 2350 5350

850 [7]

Dr 2012 31-Oct Office equipment [1/2]

Disposal a/c 6700

Cr 2012 31-Oct Prov for dep [1/2] Bank [1/2] Loss [1/2]

4500 1200 1000 [2m] 6700

6700

BARTLEY SEC 4E5N PRELIM P2 Q5 2008

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