Illustration

The financial year end of Oak Ltd is 31 Dec 2006. On 1 Jan 2006 the company had in use
equipment with a total accumulated cost of £ 135 620 which had been depreciated by a
total of £ 81 374. During the year ended 31 Dec 2006 Oak Ltd purchased new equipment
costing £ 47 800 and sold off equipment which had originally cost £ 36 000, and which
had been depreciated by £ 28 224, for £ 5 7000. No further purchases or sales of
equipment are planned for December. The policy of the company is to depreciate
equipment at 40% using the reducing balance method. Full year depreciation is provided
for on all equipment in use by the company at the end of each year.

Required:
Show the following ledger accounts for the year ended 31 Dec 2006.
i. The equipment account
ii. Provision for depreciation on equipment account
iii. The assets disposal account

Equipment

Balance b/d 135 620 Assets disposal 36 000

Bank 47 800 Balance c/d 147 420
183 420 183 420
Balance b/d 147 420

Provision for depreciation- Equipment

Assets disposal 28 224 Balance b/d 81 374

Balance c/d 90 858 Profit and loss a/c 37 708
119 082 119 082
Balance b/d 90 858

Assets disposal

Equipment 36 000 Provision for depreciation 28 224

Bank 57 000
Profit and loss a/c 2 076
36 000 183 420