Question

Depreciation is an important factor in reflecting the true value of the assets of a business in the balance sheet. The following balances of the assets of Naidoo enterprises were reflected in the balance sheet at 28 February 2003. Motor vehicles (at cost) 52 050 Office equipment (at cost) 19 418 Security alarm systems (at cost) 17 223 The Accumulated depreciation reflected in the balance sheet at 28 February 2003 was: Motor vehicles 12 236 Office equipment 5 879 Security alarm 2 583 The transaction affecting assets and depreciation during the financial year 1 March 1993 to 28 February 1994 were as follows: March 1 sold old Motor vehicle (cost price R5 770 and accumulated R3 250) to J. Smith for R 2000 cash. April 30 purchased new vehicle for 35 000 cash. June 1 purchased a computer for R12 500 cash.

Updated Question

Answer 1

Answer:

Note: Question has typing error with date, Instead of duration of transection period, which must be from 1st march 2003 to 28 feb 2004, it is taken as ist march 1993 to 28 feb 1994. so we assume the correct period is march 2003 to feb 2004, and slovve the question accordingly.

Some Explanation:

Question requires to depreciate the asstes under two mathods, viz: straight line as well as reducing balance mathod.

Under straight line mathod we charge depreciation on opening cost of the aquired assets irrespective of already use of period of assets. if any part of the assets is sold after that then original cost will be reduced by the cost of the assets and charge the depreciation on initial original cost of the remaining assets. Similar treatment will be given to further purchase of the asstes if any become part of the pool of the assets.

Under Reducing Balalnce Mathod we Charge depreciation on reducing balalnce of the ledger which is calculated as:

Opening Balalnce+ purchses-assets sold- depreciartion till date= depreciable balalnce at the end of the year.

Now the Required calculation as produces below:

Requirment 1

		Journal Entry
Date	Particulars	Debit	Credit
	Cash A/c	2200.00
	To Motor Vehicle A/c		2000.00
	To Office Equipments A/c		200.00
	(being Sale Of Assets)
	Motor Vehicle A/c	35000.00
	Equipments A/c	12500.00
	To Cash		47500.00
	Profit & Loss A/c	570.00
	To Assets Sold A/c		570.00
	(Net Loss on Assets Sold)
	Profit & Loss A/c	22984.88
	To Accumlated Dep A/c:
	Motor Vehicle		15089.33
	Equipments		5312.10
	Security Alrm		2583.45
	( Being Yearly Dep on Assets)

Requirment 2

	Motor Vehicle Account(at Cost)
Date	Particular	Amount	Date	Particulars	Amount
1-Mar-03	To Balance B/d	52050.00	1-Mar-03	By Assets Sold A/c	5770.00
30-Apr-03	To Cash A/c	35000.00	28-Feb-04	By Balance C/d	81280.00
		87050.00			87050.00
	Office Equipments Account(at Cost)
Date	Particular	Amount	Date	Particulars	Amount
1-Mar-03	To Balance B/d	19418.00	31-Jul-03	By Assets Sold A/c	1000.00
1-Jun-03	To Cash a/c	12500.00	28-Feb-04	By Balance C/d	30918.00
		31918.00			31918.00
	Security Alarm Account(at Cost)
Date	Particular	Amount	Date	Particulars	Amount
1-Mar-03	To Balance B/d	17223.00	28-Feb-04	by Balance C/d	17223.00
		17223.00			17223.00
	Assets Sold Account
Date	Particular	Amount	Date	Particulars	Amount
1-Mar-03	Motor Vehecle A/c	5770.00		By Assets Sold A/c	3250.00
31-Jul-03	Office Equipment A/c	1000.00		By Assets Sold A/c	750.00
				By CashA/c	2000.00
				By Cash A/c	200.00
				BY P& L A/c(Loss)	570.00
		6770.00			6770.00
	Accumlated Depreciation
	Motor Vehicle Account
Date	Particular	Amount	Date	Particulars	Amount
	To Assets Sold A/c	3250.00	1-Mar-03	By Balance B/d	12236.00
	(Dep on vehicle sold)		28-Feb-04	By P&L A/c	15089.33
28-Feb-04	To Balance C/d	24075.33
		27325.33			27325.33
	Accumlated Depreciation
	Office Equipments Account
Date	Particular	Amount	Date	Particulars	Amount
			1-Mar-03	By Balance B/d	5879.00
	To Asets Sold A/c	750.00	28-Feb-04	By P&L A/c	5312.10
	(Dep on Equip Sold)
28-Feb-04	To Balance C/d	10441.10
		11191.1			11191.10
	Accumlated Depreciation
	Security Alarm Account
Date	Particular	Amount	Date	Particulars	Amount
			1-Mar-03	By Balance B/d	2583.00
28-Feb-04	To Balance C/d	5166.45		By P&L A/c	2583.45
		5166.45			5166.45

Working Note:

Dep on Motor Vehicle at 20%
on (52050-5770) for 12 month		9256.00
On 35000 for 10 month		5833.33
				15089.33
Equipments @ 15%
On (19418-5879) for 12 month		3905.85
On fresh Purchase 12500 for 9 month	1406.25
				5312.1
Security Alarm
on 17223				2583.45
				2583.45

Thanks