Depreciation of motor vehicle – selling expenses

Other depreciation – administrative exenses

Do from the trial balance , preparation of income statement and balance sheet

Wren has provided you with the following information. Calculate the depreciation, accumulated
depreciation, written down value and profit or loss on disposal of the non-current assets. Show the
general journal, general ledger accounts and the extracts of the statement of financial position as at the
end of the years 30 September 2017, 2018 and 2019

2016 Nov 1 Bought plant P $40000 from Pokok on credit. Residual value of the plant was
expected to be $2000. It was expected to have a useful life of 80,000 litres of the
product. The units of use depreciation was charged on the plant each year.
2017 Jan 31 Bought 3 pieces of furniture(F,G and H) $50000 from Kehsi on credit. Residual value
of the furniture was expected to be $700. It was expected to have a useful life 20
years. Straight line depreciation was charged on the furniture each year.
2017 May 1 Bought equipment $80000 from Keekih on a cash basis. Residual value of the
equipment was expected to be $5000. Reducing balance depreciation was charged on
the equipment at the rate of 23% p.a.
2017 Sep 30 The plant P produced 20,000 litres of product by this date
2017 Oct 31 Bought another plant H $90000 from Pokok on credit. Residual value of the plant was
expected to be $6000. Useful life of plant H was estimated to be 4 years. The plant
was depreciated using the sum-of-the-years’ digits method.
2018 Sep30 Plant P produced 13000 litres of product this year
2019 July 31 Sold off 1 piece of the furniture F bought in 2017 which cost $20000 on credit to
Calmthestorm for $10000
2019 August Traded in 1 piece of the furniture G bought in 2017 which cost $8000 for new
1 furniture J which cost $14000. The trade in allowance was $1800. There was no
residual value for J. It was expected to have a useful life of 8 years. Straight line
depreciation was applied on furniture J. The balance of furniture G was paid in cash
2019 Sep 30 Plant P produced 11000 litres of product this year

Plant P Cost Residual Total Depreciation Useful Accumulate Net

value depreciable life d book
value depreciation value
1 Nov 2016 40 000 2000 38000 800000
litres
Depreciation 38000/ $ 0.48
rate 80000 per litre
Sep 30 2017 0.48 x 20 9600 30400
000 = 9600
Sep 30 2018 0.48 x 13000 9600 + 6240 24160
= 6240 = 15840
Sep 30 2019 0.48 x 11000 15840 + 18880
= 5280 5280 =
21120

Furniture F Cost Residual Total Usefu Depreciation Accumulate Net

value depreciable l life d book
value depreciation value
31 Jan 2017 20 20000/50000 20 000-280 20
000 x 700 = 280 = 19720 years
30 Sep 2017 8/12 x 657 19343
19720/20 =
657
30 Sep 2018 19720/20 = 657 + 986 = 18357
986 1643
31 Jul 2019 10/12 x 1643 + 822 = 17535
19720 /20 = 2465
822
Disposal to 10000
Calmthestor
m
Profit on 7535
disposal

Furniture Cost Residual Total Useful Depreciation Accumulated Net

G value depreciable life depreciation book
value value
31 Jan 8000 8000/50 8000 – 112 20 years
2017 000 x 700 = 7888
= 112
30 Sep 7888/20 x 263 7737
2017 8/12 = 263
30 Sep 7888/20 = 657 7343
2018 394
1 Aug 7888/20 x 986 7014
2019 10/12 = 329
Traded in 1800
Loss on 5214
disposal

Furniture Cost Residual Total Useful Depreciation Accumulated Net

H value depreciable life depreciation book
value value
31 Jan 22 000 22000/50 21692 20 years
2017 000 x 700
= 308
30 Sept 21692 / 20 x 723 21277
2017 8/12 = 723
30 Sept 21692/20 = 1808 20192
2018 1085
30 Sept 1085 2893 19107
2019

Equipment Cost Residual Total Depreciation Accumulated Net book

value depreciable depreciation value
value
1 May 2017 80 000 5000 75 000
30 Sep 2017 75000 x 23% 7188 72812
x 5/12 =
7188
30 Sep 2018 (75000 – 22785 57215
7188) x 23%
= 15597
30 Sep 2019 (75000 – 34794 45206
22785) x
23% = 12009

Plant H Cost Residual Total Sum-of Useful Depreciation Total Net

value depreciable the life depreciable book
value years value value
digits
31 Oct 90 000 6000 84000 4+3+ 4
2017 2+1= years
10
30 Sep 84000 x 30800 59200
2018 4/10 x 11/12
= 30800
30 Sep 84000 x 56000 34000
2019 3/10 =
25200

Furniture J Cost Useful life Depreciation Accumulated Net book

depreciation value
1 August 14 000 8 years
2019
30 Sep 2019 14 000 / 8 x 292 13708
2/12 =
 Wren
General Journal
Date Particulars Debit Credit
1 Nov 2016 Plant P 40 000
Pokok 40 000
Bought plant P on credit
31 Jan 2017 Furniture F 20 000
Kehsi 20 000
Bought furniture on credit
Furniture G 8000
Kehsi 8000
Bought furniture on credit
Furniture H 22 000
Kehsi 22 000
Bought furniture on credit
1 May 2017 Equipment 80000
Cash 80000
Bought equipment on a cash basis
30 Sept Depreciation of plant P 9600
2017 Accumulated depreciation of plant P 9600
Units-of-use depreciation- Adjusting entry
Depreciation of furniture F,G and H 1643
Accumulated depreciation of furniture F,G and H 1643
Straight line depreciation over 20 years - Adjusting entry
Depreciation of equipment 7188
Accumulated depreciation of equipment 7188
Reducing balance depreciation- Adjusting entry
31 Oct 2017 Plant H 90 000
Pokok 90 000
Bought plant H on credit
Income statement 18431
Depreciation of equipment 7188
Depreciation of furniture 1643
Depreciation of plant 9600
Closing entries
30 Sep 2018 Depreciation of furniture F,G and H 2465
Accumulated depreciation of furniture F,G and H 2465
Straight line depreciation- Adjusting entry
Depreciation of plant P and H 37040
Accumulated depreciation of plant P and H 37040
Year end depreciation - Adjusting entry

Depreciation of equipment 15597

Accumulated depreciation of equipment 15597
Sum-of-the years’ digits depreciation- Adjusting entry
 Income statement 55102
Depreciation of furniture 2465
Depreciation of plant 37040
Depreciation of equipment 15597
Closing entries
31 July 2019 Depreciation of furniture F 822
Accumulated depreciation of furniture F 822
31 July 2019 Accumulated depreciation of furniture F 2465
Calmethestorm 10000
Disposal of furniture 7535
Furniture 20 000
Disposal of furniture F to Calmethestorm
Loss on disposal 7535
Disposal of furniture F 7535
Transfer of loss to loss on disposal account
1 August Depreciation of furniture G 329
2019 Accumulated depreciation of furniture G 329
Depreciation of furniture for 10 months - Adjusting entry
Accumulated depreciation 986
Furniture(J) 1800
Disposal of furniture 5214
Furniture (G) 8000
Disposal of furniture G – traded in for furniture J
Furniture J 12200
Cash 12200
Paid balance of furniture J
Loss on disposal of furniture 5214
Disposal of furniture 5214
Transfer of loss to loss on disposal account
30 Sep 2019 Depreciation of plant (P+H) 30480
Accumulated depreciation of plant 30480
Units of use of depreciation – adjusting entry
Depreciation of furniture H and J 1377
Accumulated depreciation of furniture 1377
Adjusting entry
Depreciation of equipment 12009
Accumulated depreciation of equipment 12009
23% reducing balance depreciation - Adjusting entry
Income statement 57766
Depreciation of plants 30480
Deprecation of equipment 12009
Depreciation of furniture (329 + 822 + 1085 + 292) 2528
Loss on disposal of furniture 5215+ 7535 12749
Closing entries
 Plant account
1 Nov 2016 Pokok 40 000 30 Sep 2018 Balance c/d 130 000
31 Oct 2017 Pokok 90 000
130 000 130 000
1 Oct 2018 Balance b/d 130 000

Furniture account
31 Jan 2017 Kehsi ( 3 50 000 31 July 2019 Disposal – first 20 000
pieces of one u sold of
furniture) ( put cost )
1 Aug Disposal – 1800 1 August 2019 Disposal 8000
trade in value
Cash 12200 30 Sep 2019 Balance c/d – 36 000 ( 22000
left over + new 14000)
furniture
64 000 64 000
1 Oct 2020 Balance b/d 36 000

Equipment account
1 May 2017 Cash 80 000

Depreciation of plant account

30 Sep 2017 Accumulated 9600 30 Sep 2017 Income 9600
depreciation statement
of plant
30 Sep 2018 Accumulated 37040 30 Sep 2018 Income 37040
depreciation statement
of plant
30 Sep 2019 Accumulated 30480 30 Sep 2019 Income 30480
depreciation statement
of plant

Depreciation of furniture account

30 Sept 2017 Accumulated 1643 30 Sep 2017 Income 1643
depreciation statement
of furniture
30 Sept 2018 Accumulated 2465 30 Sept 2018 Income 2465
depreciation statement
of furniture
31 July 2019 Accumulated 822 30 Sept 2019 Income 2528
depreciation statement
of furniture
1 August 2019 Accumulated 329
depreciation
of furniture G
30 Sept 2019 Accumulated 1377
depreciation
of furniture

Accumulated depreciation of furniture account

30 Sep 2018 Balance c/d 4108 30 Sept 2017 Depreciation 1643
of furniture
30 Sept 2018 Depreciation 2465
of furniture
4108 4108
31 July 2019 Disposal 2465 1 Oct 2019 Balance b/d 4108
1 August 2019 Disposal 986 31 July 2019 Depreciation 822
of furniture
30 Sept 2019 Balance c/d 3185 1 Aug 2019 Depreciation 329
of furniture
30 Sep 2019 Depreciation 1377
of furniture
6636 6636
1 Oct 2020 Balance b/d 3185
( left over acc
of furniture )

Accumulated depreciation of plant account

30 Sep 2018 Balance c/d 46640 30 Sept 2017 Depreciation 9600
of plant
30 Sept 2018 Depreciation 37040
of plant
46640 46640
30 Sep 2019 Balance c/d 77120 1 Oct 2019 Balance b/d 46640
30 Sep 2019 Depreciation 30480
of plant
77120 77120
1 Oct Balance b/d 77120

Disposal of furniture account

31 July 2019 Furniture F 20000 31 July 2019 Accumulated 2465
(cost) depreciation
 Calmthestorm 10 000
Loss on 7535
disposal
20 000 20 000
1 August 2019 Furniture 8000 1 Aug 2019 Accumulated 986
depreciation
Furniture 1800
Loss on 5214
disposal
8000 8000

Loss on disposal of furniture account

31 July 2019 Disposal 7535 30 Sept 2019 Income 12749
statement
1 August 2019 Disposal 5214

Depreciation of equipment account

30 Sept 2017 Accumulated 7188 30 Sept 2017 Income 7188
depreciation statement
of equipment
30 Sept 2018 Accumulated 15597 30 Sept 2018 Income 15597
depreciation statement
of equipment
30 Sept 2019 Accumulated 12009 30 Sept 2019 Income 12009
depreciation statement
of equipment

Accumulated depreciation of equipment account

30 Sept 2018 Balance c/d 22785 30 Sept 2017 Depreciation 7188
of equipment
30 Sept 2018 Depreciation 15597
of equipment
22785 22785
30 Sept 2019 Balance c/d 34794 1 Oct 2019 Balance b/d 22785
30 Sept 2019 Depreciation 12009
of equipment
34794 34794
1 Oct 2020 Balance b/d 34794
 Income statement account
30 Sept 2017 Depreciation 7188
of equipment
Depreciation 1643
of furniture
Depreciation 9600
of plant

30 Sept 2018 Depreciation 2465

of furniture
Depreciation 37040
of plant
Depreciation 15597
of equipment

30 Sept 2019 Depreciation 30480

of plants
Depreciation 12009
of equipment
Depreciation 2528
of furniture
Loss on 12749
disposal of
furniture

Wren
Balance sheet as at 30 Sept 2017
Cost Accumulated Net book
depreciation value
Plant 40 000 (9600) 30400
Furniture 50 000 (1643) 48357
Equipment 80 000 (7188) 72812
170 000 18431 151569

Wren
Balance sheet as at 30 Sept 2018
Cost Accumulated Net book value
depreciation
Plant 130 000 (46640) 83360
Furniture 50 000 4108 45892
Equipment 80 000 22785 57215
260 000 73533 186467
 Wren
Balance sheet as at 30 Sept 2019
Cost Accumulated Net book value
depreciation
Plant 130 000 77120 52880
Furniture 36 000 3185 32815
Equipment 80 000 34794 45206
246 000 115099 130901

Consistency concept

Matching concept

What is cost

What is the meaning depreciation

Why have depreciation

Causes of depreciation

Useful life – period of time the non-current asset provides u future benefit ( estimate)

What is residual value – estimate the expected recoverable amount at the end of it’s useful life , based
on the past experience

Scrap value

What is another name for net book value

What makes asset loose value

What do you mean by the cost of the asset – purchase price, install price , prepare the cite ( set up
furniture) , taxie label , cost of overhall

Cost that allows you to continue increase ur productivity – cost

Repair x cost

Displayed cabinet for sales – part of selling expenses

Cost and net book value, find depreciation rate using sum-of the year’s digits method

Cost Dep Acc Dep NBV

1 Jan 2017 50 000
31 Dec 2017 25% x 50 000 = 12500 37500
$12500
31 Dec 2018 25% x (50000 21875 28125
-12500) = 9375

Rate x nbv = 9375

Rate = 9375/nbv x 100

37500 – 28125 = 9375 (Depreciation for the year)