Question

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Question 4

a. Ahmad bought a new equipment at RM120,000 on 1 July 2017 . He was undecided whether to depreciate the equipment using straight line method or reducing method at \(20 \%\) per annum.

The equipment is expected to have no residual value.

You are required to calculate the amount of depreciation to be charged against each financial year ending 31 December 2017,31 December 2018 and 31 December 2019 using the straight line method and reducing balance method.

Show your answer in the following format :

\begin{array}{|c|c|c|}

\hline Financial Year ending: & Siraight Line Method & Reducing Balance Method \\

\hline & RM & RM \\

\hline 31 December 2017 & & \\

\hline 31 December 2018 & & \\

\hline 31 December 2019 & & \\

\hline

\end{array}

b. The following are balances brought forward from 31 December 2018 for KC Deco Center:

Motor Vehicles \(\begin{array}{ll}\text { RM } & \text { RM } \\ 100,000 & \end{array}\)

Less : Provision for depreciation (20,000)

80,000

The motor vehicles were depreciated at \(15 \%\) per annum using reducing balance method. KC bought a new vehicle on 1 October \(2019,\) cost of the new vehicle was RM120,000. You are required to prepare the following accounts for financial year ending 31 December 2019 :

I. The Motor Vehicle Account

The Provision for Depreciation Account \((11\) marks)

Answer 1

a)

Financial Year Ending Straight Line Method Reducing Balance Method Note RM Note RM 31-Dec-17 120000*20%*6/12 12000 120000*20%*6/12 12000 31-Dec-18 120000*20% 24000 (120000-12000) *20% 21600 31-Dec-19 120000*20% 24000 (120000-12000-21600) * 20% 17280

b)

RM Date Particulars 01-Jan-18 To balance b/d 01-Oct-19 To bank (New Vehicle) Motor Vehicle Account RM Date Particulars 100000 120000 31-Dec-19 By balance c/d 220000 220000 220000

Date Particulars RM Provision for Depreciation RM Date Particulars 01-Jan-19 By balance b/d By depreciation 31-Dec-19 (Note-1) 20000 16500 31-Dec-19 To balance c/f 36500 36500 36500

Note-1

Depreciation Expense=(80000*0.15)+(120000*0.15*3/12)

=12000+4500=16500

On Opening balance On adjusted amount(100000-20000)=80000 @15% for whole year

On new purchase @15% for the period of 3 months from October to december