UNIT 15

DEPRECIATION AND THE DISPOSAL OF NON-CURRENT

ASSETS

Question 1

Depreciation charge for the year ended

31 December 2011 31 December 2012
$ $
Equipment 4 600 4 600
Furniture and fittings 4 000 3 200
Crockery 700 900

Question 2

Depreciation charge for the year ended

31 December 2011 31 December 2012
$ $
Machinery 24 000 24 000
Fixtures 9 000 6 300
Tools 1 300 1 400

Question 3

JOURNAL
Date Details Dr Cr
2011 $ $
Dec 31 Income statement 9 300
Provision for depreciation (equipment) 4 600
Provision for depreciation (furniture and fittings) 4 000
Provision for depreciation (crockery) 700
Entries to charge depreciation of non-current
assets at the year end

2012 $ $
Dec 31 Income statement 8 700
Provision for depreciation (equipment) 4 600
Provision for depreciation (furniture and fittings) 3 200
Provision for depreciation (crockery) 900
Entries to charge depreciation of non-current
assets at the year end
Dr Equipment account Cr
2011 $ $
Jan 1 Balance 25 000

Dr Provision for depreciation of Equipment account Cr

$ 2011 $
Dec 31 Income statement 4 600
2012
Dec 31 Income statement 4 600

Dr Furniture and fittings account Cr

2011 $ $
Jan 1 Balance 20 000

Dr Provision for depreciation of Furniture and fittings account Cr

$ 2011 $
Dec 31 Income statement 4 000
2012
Dec 31 Income statement 3 200

Dr Crockery account Cr
2011 $ 2011 $
Jan 1 Balance 5 000 Dec 31 Income statement 700
Balance c/d 4 300
5 000 5 000
2012 2012
Jan 1 Balance b/d 4 300 Dec 31 Income statement 900
Bank 1 300 31 Balance c/d 4 700
5 600 5 600
Jan 1 Balance b/d 4 700

Income Statement for the year ended 31 December 2011

$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 9 300
(xx)
Profit for year xx

Income Statement for the year ended 31 December 2012

$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 8 700
(xx)
Profit for year xx
Question 4

JOURNAL
Date Details Dr Cr
2011 $ $
Dec 31 Income statement 34 300
Provision for depreciation (machinery) 24 000
Provision for depreciation (fixtures) 9 000
Provision for depreciation (tools) 1 300
Entries to charge depreciation of non-current
assets at the year end

2012 $ $
Dec 31 Income statement 31 700
Provision for depreciation (machinery) 24 000
Provision for depreciation (fixtures) 6 300
Provision for depreciation (tools) 1 400
Entries to charge depreciation of non-current
assets at the year end

Dr Machinery account Cr
2011 $ $
Jan 1 Balance 120 000

Dr Provision for depreciation of Machinery account Cr

$ 2011 $
Dec 31 Income statement 24 000
2012
Dec 31 Income statement 24 000

Dr Fixtures account Cr
2011 $ $
Jan 1 Balance 30 000

Dr Provision for depreciation of Fixtures account Cr

$ 2011 $
Dec 31 Income statement 9 000
2012
Dec 31 Income statement 6 300

Dr Tools account Cr
2011 $ 2011 $
Jan 1 Balance 11 200 Dec 31 Income statement 1 300
Balance c/d 9 900
11 200 11 200
2012 2012
Jan 1 Balance b/d 9 900 Dec 31 Income statement 1 400
Bank 2 600 31 Balance c/d 11 100
12 500 12 500
Jan 1 Balance b/d 11 100
 Income Statement for the year ended 31 December 2011
$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 34 300
(xx)
Profit for year xx

Income Statement for the year ended 31 December 2012

$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 31 700
(xx)
Profit for year xx

JOURNAL
Date Details Dr Cr
Year 1 $ $
Dec 31 Profit and loss 108 000
Provision for depreciation (machinery) 64 000
Provision for depreciation (fixtures) 11 500
Provision for depreciation (vehicles) 32 500
Entries to charge depreciation of non-current
assets at the year end

Year 2 $ $
Dec 31 Profit and loss 99 875
Provision for depreciation (machinery) 64 000
Provision for depreciation (fixtures) 11 500
Provision for depreciation (vehicles) 24 375
Entries to charge depreciation of non-current
assets at the year end

Dr Machinery account Cr
Year 1 $ $
Jan 1 Balance 320 000

Dr Provision for depreciation of Machinery account Cr

$ Year 1 $
Dec 31 Income statement 64 000
Year 2
Dec 31 Income statement 64 000

Dr Fixtures account Cr
Year 1 $ $
Jan 1 Balance 50 000
Dr Provision for depreciation of Fixtures account Cr
$ Year 1 $
Dec 31 Income statement 11 500
Year 2
Dec 31 Income statement 11 500

Dr Vehicle account Cr
Year 1 $ $
Jan 1 Balance 130 000

Dr Provision for depreciation of Vehicle account Cr

$ Year 1 $
Dec 31 Income statement 32 500
Year 2
Dec 31 Income statement 24 375

Income Statement for the year ended 31 December 2011

$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 108 000
(xx)
Profit for year xx

Income Statement for the year ended 31 December 2012

$ $
Gross profit xx
Expenses xx
Depreciation of non-current assets 99 875
(xx)
Profit for year xx

Question 5

Balance Sheet at 31 December 2011 (Extract)

$ $ $
Total Net
Cost Depreciation
NON-CURRENT ASSETS
Equipment 25 000 4 600 20 400
Furniture and fittings 20 000 4 000 16 000
Crockery at valuation 4 300

Balance Sheet at 31 December 2012(Extract)

$ $ $
Total Net
Cost Depreciation
NON-CURRENT ASSETS
Equipment 25 000 9 200 20 400
Furniture and fittings 20 000 7 200 12 800
Crockery at valuation 4 700
Question 6

Balance Sheet at 31 December 2011 (Extract)

$ $ $
Total Net
Cost Depreciation
NON-CURRENT ASSETS
Machinery 120 000 24 000 96 000
Fixtures 30 000 9 000 21 000
Tools at valuation 9 000

Balance Sheet at 31 December 2012 (Extract)

$ $ $
Total Net
Cost Depreciation
NON-CURRENT ASSETS
Machinery 120 000 48 000 72 000
Fixtures 30 000 15 300 14 700
Tools at valuation 11 100

Question 7

JOURNAL
Date Details Dr Cr
$ $
Aug 10 Furniture and fittings disposal 21 000
Furniture and fittings 21 000
Entries to transfer the cost of furniture and
fittings upon disposal

10 Provision for depreciation of furniture and fittings 16 400

Furniture and fittings disposal 16 400
Entries to transfer the provision for depreciation
upon disposal of the furniture and fittings

Dr Furniture and fittings account Cr

$ $ $
Furniture and
Jan 1 Balance 21 000 Aug 10 fittings disposal 21 000

Dr Provision for depreciation of Furniture and fittings account Cr

$ $
Furniture and
Aug 10 fittings disposal 16 400 Jan 1 Balance 16 400

Dr Furniture and fittings Disposal account Cr

$ $
Furniture and fittings
Aug 10 Furniture and fittings 21 000 Aug 10 depreciation 16 400
10 Bank 2 500
Dec 31 Income statement 2 100
 (loss on disposal)
21 000 21 000

Question 8

JOURNAL
Date Details Dr Cr
$ $
Mar 14 Delivery vehicles disposal 22 000
Delivery vehicles 22 000
Entries to transfer the cost of delivery vehicle
upon disposal

14 Provision for depreciation of delivery vehicles 17 500

Delivery vehicles disposal 17 500
Entries to transfer the provision for depreciation
upon disposal of the delivery vehicle

Dr Delivery vehicles account Cr

$ $ $
Delivery vehicles
Jan 1 Balance 88 000 Mar 14 disposal 22 000

Dr Provision for depreciation of Delivery vehicles account Cr

$ $
Delivery vehicles
Mar 14 disposal 17 500 Jan 1 Balance 39 000

Dr Delivery vehicles Disposal account Cr

$ $
Delivery vehicle
Mar 14 Delivery vehicle 22 000 Mar 14 depreciation 17 500
Income statement (profit
Dec 31 on disposal) 1 300 14 Bank 5 800
23 300 23 300

Question 9

Great Value Stores

Income Statement for the year ended 31 December 2012
$ $
Gross profit 100 000
Less expenses:
Other operating expenses 27 000
Rent 12 000
Depreciation of non-current assets 18 600
(57 600)
Profit for year 42 400

Note: depreciation is $600 (equipment); $9250 (furniture and fittings) and $8750
(vehicles)
 Balance Sheet at 31 December 2012
$ $ $ $
NON-CURRENT ASSETS Cost Total Net CAPITAL 73 400
Deprcn
Furniture and fittings 41 000 9 250 31 750 CURRENT LIABILITIES
Vehicles 35 000 8 750 26 250 Trade payables 18 000
Office equipment at Accruals (other operating
valuation 2 400 exp) 3 000
60 400 21 000
CURRENT ASSETS
Inventory 12 000
Trade receivables 15 000
Prepayments (rent) 1 000
Cash at bank 6 000
34 000
94 400 94 400

Question 10

Jody
Income Statement for the year ended 31 December 2012

$ $
Gross profit 145 700
Less expenses:
Insurance 7 700
Other operating expenses 77 500
Depreciation of non-current assets 16 900
(102 100)
Profit for year 43 600

Note: depreciation is $4200 (equipment); $12 000 (fixtures and fittings) and $700
(crockery)

Balance Sheet at 31 December 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net CAPITAL 42 500
Deprcn
Fixtures and fittings 30 000 12 000 18 000 CURRENT LIABILITIES
Equipment 23 000 4 200 18 800 Trade payables 6 200
Crockery etc at valuation 5 700 Accruals (other operating exp) 2 200
42 500 Bank overdraft 11 300
CURRENT ASSETS 19 700
Inventory 14 900
Trade receivables 4 100
Prepayments (insurance) 700
19 700
62 200 62 200
Question 11

Esther
Income Statement for the year ended 31 May 2012

$ $
Gross profit 234 000
Add income:
Profit on sale of delivery vehicle 900
234 900
Less expenses:
Administration expenses 4 800
Electricity charges 7 200
General expenses 6 600
Wages and salaries 63 780
Depreciation of non-current assets 39 000
(121 380)
Profit for year 113 520

Notes:
 Profit on disposal of delivery vehicle is: disposal proceeds $5400 less net
book value $4500 (cost $22 000 less depreciation $17 500) = $900
 Depreciation of non-current assets: 25% x net book value $156 000 Comment [VR1]: Please see
VR query list

Question 12

Ombeya
Income Statement for the year ended 30 November 2012
$ $
Gross profit 382 500
Add income:
Rent received 8 960
391 460
Less expenses:
General expenses 10 120
Electricity charges 7 140
Insurance 8 890
Repairs and maintenance 3 540
Wages and salaries 47 800
Water charges 4 810
Loss on disposal of office equipment 850
Depreciation of non-current assets 24 000
(107 150)
Profit for year 284 310

Notes:
 Profit on disposal of office equipment is: net book value $1700 (cost $9500
less depreciation $7800) less disposal proceeds $850 = $850
 Depreciation of non-current assets:
(20% x cost $112 000 = 22 400) + ($15 400 - $13 800 = $1600)
Question 13

Kavita
Income Statement for the year ended 31 December 2012
$ $
Gross profit 137 230
Add income
Profit on disposal of fittings 840
138 070
Less expenses:
Electricity 8 170
Rent 13 310
Selling expenses 3 670
Wages 55 460
Depreciation of non-current assets 13 830
94 440
Profit for year 43 630

Note: depreciation is $680 (equipment); $6400 (furniture and fittings) and vehicles
$6750

Balance Sheet at 31 December 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net CAPITAL 58 580
Deprcn
Vehicles 48 000 27 750 20 250 CURRENT LIABILITIES
Furniture and fittings 32 000 19 200 12 800 Trade payables 11 210
Office equipment at valuation 3 100 Accruals (electricity
36 150 exp and wages) 2 350
CURRENT ASSETS 13 560
Inventory 15 600
Trade receivables 7 470
Prepayments (rent, selling exp) 1 070
Cash at bank 11 850
35 990
72 140 72 140
Question 14

Salman Fresh Foods

Income Statement for the year ended 31 December 2011

$ $ $
Revenue 382 880
less sales returns (2 210)
380 670
Opening inventory 15 510
Add Purchases 247 610
less purchases returns (3 720)
243 890
259 400
Closing inventory (16 530)
Cost of sales (242 870)
Gross profit 137 800
Less expenses:
Carriage outwards 470
General expenses 3 340
Insurance 6 970
Loss on disposal of a vehicle 1 700
Wages 68 800
Depreciation of non-current assets 10 314
(91 594)
Profit for year 46 206

Note: depreciation is $5600 (furniture and fittings); $4144 (vehicles) and $570 (office
equipment)

Balance Sheet at 31 December 2012

$ $ $ $
NON-CURRENT ASSETS Cost Total Net CAPITAL 36 706
Deprcn
Vehicles 60 000 43 424 16 576 CURRENT LIABILITIES
Furniture and fittings 28 000 22 400 5 600 Trade payables 4 830
Office equipment at valuation 2 280 Accruals (wages) 1 420
24 456 Bank overdraft 2 370
CURRENT ASSETS 8 620
Inventory 16 530
Trade receivables 4 020
Prepayments (insurance) 320
20 870
45 326 45 326