GRADE 11 LESSON

19

FIXED ASSETS

DEPRECIATION

WORKSHEET 3
Baseline assessment
Calculating accumulated depreciation

Accumulated depreciation The total depreciation over time on the asset

ACTIVITY 4

ACTIVITY 4 – accumulated depreciation

INFORMATION
The financial year ends on 31 December each year.
Bought a vehicle for R100 000 on 1 January 2010

REQUIRED
1 Calculate depreciation at 25% on cost price and complete the table.
2 Calculate depreciation at 25% at the diminishing balance method and complete the table.

Cost Depreciation Accumulated

price Date 25% on diminishing balance depreciation Carrying value
100 000 31 Dec 2010
31 Dec 2011
31 Dec 2012

19 Accounting Grade 11 - CAPS 1

FULLY DEPRECIATED ASSETS
RESIDUAL AMOUNT – CARRYING VALUE OF R1

The full amount of an asset cannot be written off as long as it is in the business’s possession.
The carrying value is kept at R1.
R1 is a residual value –value of an asset after it has been fully depreciated

NOTE: If the company continues to use the vehicle the next financial year, this asset will not
be depreciated. SARS will not approve any further expense deduction resulting from the
asset that has been depreciated to full term.

EXAMPLE 1

When accumulated depreciation exceeds the cost of an asset, then the carrying value must
be R1.

Cost R100 000

Accumulated depreciation at the beginning of the year 98 000
Carrying value at beginning of the year (100 000 – 98 000) 2 000
Depreciation for the current year 5 000
Total accumulated depreciation (98 000 + 5 000) 103 000
The carrying value will be (100 000 – 103 000) -3 000 (it cannot be
negative)

Therefore the annual depreciation must be reduced so that the carrying value
(book value) will be R1.
Therefore the depreciation for the year will be reduced to R1 999.

The total accumulated depreciation will therefore be shown as

R98 000 + R1 999 = R99 999.

Cost R100 000

Accumulated depreciation (R 99 999)
Carrying value end of the year R 1

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19 Accounting Grade 11 - CAPS 2

HOW IT WIIL APPEAR IN THE FINANCIAL STATEMENTS

NOTE 3: TANGIBLE ASSETS

Vehicles
Cost 100 000
Accumulated depreciation (98 000)
Carrying value beginning of year 2 000
Movements
Additions at cost 0
Disposals at carrying value 0
Depreciation for the year (1 999)
Carrying value at end of the year 1
Cost 100 000
Accumulated depreciation (99 999)

NOTE:
The R1 carrying value or residual value will continue to appear in our records in the next
financial year.
The full amount of an asset cannot be written off as long as it is in the possession of the
business.
The cost price of R100 000 will be reflected in the Notes for as long as the asset is used
productively in the business. GAAP Principle:
Historical cost

19 Accounting Grade 11 - CAPS 3

 ACTIVITY 5

INFORMATION
Use the information of Activity 4

REQUIRED
Now calculate the depreciation on 31 December 2013.
Cost Depreciation Accumulated
price Date At 25% on cost depreciation Carrying value
100 000 31 Dec 2010 25 000 25 000 75 000
31 Dec 2011 25 000 50 000 50 000
31 Dec 2012 25 000 75 000 25 000
31 Dec 2013

ACTIVITY 6

INFORMATION
Calculate the amount for depreciation on each of the following at the end of the financial year.
Basis of
no Asset Cost Accumulated Method of depre- Depre-
depreciation depreciation ciation ciation
1 Equipment 168 000 20 000 Diminishing 15% p.a. ?
balance method
2 Equipment 118 000 14 520 Cost ? 23 600
3 Delivery van 245 000 45 000 Diminishing 20% p.a. ?
balance method
4 Office desk 4 800 480 Fixed instalment 10% p.a. ?
5 Delivery van 120 000 108 000 Straight line 15% p.a. ?
CALCULATIONS

19 Accounting Grade 11 - CAPS 4

 ANSWERS LESSON

19

ACTIVITY 4

Cost Depreciation Accumulated

price Date 25% on cost depreciation Carrying value
100 000 31 Dec 2010 25 000 25 000 75 000
31 Dec 2011 25 000 50 000 50 000
31 Dec 2012 25 000 75 000 25 000

Cost Depreciation Accumulated

price Date 25% on diminishing balance depreciation Carrying value
100 000 31 Dec 2010 25 000 25 000 75 000
31 Dec 2011 75000 x 25% = 18 750 43 750 56 250
31 Dec 2012 56 250 x 25% = 14 063 51 813 42 197

ACTIVITY 5
Cost Depreciation Accumulated
price Date At 25% on cost depreciation Carrying value
100 000 31 Dec 2010 25 000 25 000 75 000
31 Dec 2011 25 000 50 000 50 000
31 Dec 2012 25 000 75 000 25 000
31 Dec 2013 24 999 99 999 1

ACTIVITY 6 - calculate depreciation at diminishing balance & cost price

INFORMATION
Calculate the amount for depreciation on each of the following at the end of the financial year.
no Asset Cost Accumulated Method of Basis of
depreciation depreciation depreciatio Depreciation
n
1 Equipment 168 000 20 000 Diminishing 15% p.a. ? 22 200
balance method
2 Equipment 118 000 14 520 Cost ? 20% 23 600

3 Delivery 245 000 45 000 Diminishing 20% p.a. ? 40 000

van balance method
4 Office 4 800 480 Fixed instalment 10% p.a. ? 480
desk
5 Delivery 120 108 000 Straight line 15% p.a. ? 11 999
van 000

19 Accounting Grade 11 - CAPS 5