Question

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On 1 January 2005, a manufacturer buys a manufacturing plant for R20 000 cash. On 1 July 2006, he buys an additional plant for R4 000 cash. On 31 December 2006, he sells a plant that he bought on 1 January 2005 for R3 000 for R1 600 cash

Answer 1

This question can be solved as follows:

Machinery, Depreciation and Asset Disposal Account Machinery Alc Dr Date Particulars 01-01-2005 Cash Cr Amount Amount particulars Date 20000 12-31-2005 Bal c/d 20000 20000 20000 12-31-2006 Asset Disposal Alc 3000 01-01-2006 Bal b/d 07-01-2006 Cash 20000 4000 12-31-2006 Bal c/d 21000 24000 24000 01-01-2007 Bal b/d 04-01-2007 Cash 21000 2800 23800 12-31-2007 Bal cld 23800 23800 01-01-2008 Bal b/d 23800 10-1-2008 Asset Disposal Alc 12-31-2008 Bal c/d 1200 22600 23800 23800 01-01-2009 Balb/d 22600 12-31-2009 Bal cld 22600 22600 22600

Depreciation Provision Date Particulars Amount Date Amount Particulars Profit and Loss Statement 12-31-2005 Balold 12-31-2005 4000 4000 40001 4000 4000 1-1-2006 Bal bld Profit and Loss Statement 12-31-2006 4400 12-31-2006 Asset Disposal Alc Bal old 1200 7200 8400 84001 7200 1-1-2007 Balbid Profit and Loss Statement 12-31-2007 4820 12-31-2007 Bal old 11820 11820 540 11820 11820 10-1-2008 As set Disposal Alc 1-1-2008 Bal b'd Profit and Loss Statement 12-31-2008 4700 12-31-2007 Bal old 15980 16520 18620 15980 1-1-2009 Bal bld Profit and Loss Statement 12-31-2008 4520 12-31-2007 Baldd 20500 20500 20500

As set Disposal Alc Amount Amount Date Particulars 12-31-2006 Machinery A/C 1000 1200 Date Particulars 3000 12-31-2006 Cash 12-31-2006 Depreciation Provision Loss on sale of Machinery 12-31-2006 3000 200 3000 1200 10-1-2008 Cash 700 10-1-2008 Machinery A/C Profit on sale of Machiner 12-31-2008 40 1240 10-1-2008 Depreciation Provision 540 1240