Question

Question 1 2 A lorry is bought for a business cost RM17.000. It is expected to last for 5 years and then be sold for scrap for RM2,000. Required: Work out the depreciation to be charged each year under: (4 marks) The straight line method. (6 marks) (b) The reducing balance method (using a rate of 35%). Question 2 ww. 3 4 Marker Sdn Bhd has issued 5,000,000 ordinary shares for RM250,000 and 2,000,000, 7% preference shares for RM2,000,000. Its profits after taxation for the year to 30 September 2018 were RM8,400,000. The management board has decided to pay an ordinary dividend (ie a dividend on ordinary shares) which is 50% of profits after tax and preference dividend. Required: Calculate the amount in total of dividends and of retained profits, and calculate the dividend per share on ordinary shares. (10 marks) Question 3 m+ 3 Carpa Explain the advantages and disadvantages of the following. (5 marks) (a) (b) Bonus share. Right issue. (5 marks) Question 4 U (a) What is the purpose of depreciation? (4 marks) (b) In what circumstances is the reducing balance method more appropriate than the straight line method? Give reasons for your answer. (6 marks)

Answer 1

ANSWER:

NOTE: following figures are in RM

Depreciable value = initial cost - salvage value

= 17000 - 2000

= 15000

(A)

By straight line method of depreciation,

Depreciation per annum = depreciable value/useful life

= 15000/5

= 3000

As annual depreciation expense under this method is uniform

For each year

Depreciation expenses = 3000

(b)

For year 1:

Book value = 17000

Depreciation expenses = 17000 x 35%

= 5950

For year 2:

Book value = 17000 - 5950 = 11050

Depreciation expenses = 11050 x 35%

= 3868

For year 3:

Book value = 11050 - 3868 = 7182

Depreciation expenses = 7182 x 35%

= 2514

For year 4:

Book value = 7182 - 2514 = 4668

Depreciation expenses = 4668 x 35%

= 1634

For year 5:

Book value = 4668 - 1634 = 3034

Depreciation expenses = 3034 x 35%

= 1062