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AP question on depreciation.?
http://www.xtremepapers.net/CIE/International%20A%...
I'm having trouble understanding the answer to question #2. Can someone show me the answer and the explanation?
Thanks Sandy, but it is the depreciation rates that I do not understand. For machinery, I know that historical has been 10% of the total, but where in the question, and where in real life, would that hold true for each and every individual machine. Just because that is the average, it doesn't logically mean that it is true for each piece. Different pieces would have different depreciation schedules based on useful life. So when one piece is bought, and another piece is disposed of, they wouldn't necessarily both be the same 10% of the average. I still don't get that part.
Thanks Sandy, but it is the depreciation rates that I do not understand. For machinery, I know that historical has been 10% of the total, but where in the question, and where in real life, would that hold true for each and every individual machine. Just because that is the average, it doesn't logically mean that it is true for each piece. Different pieces would have different depreciation schedules based on useful life. So when one piece is bought, and another piece is disposed of, they wouldn't necessarily both be the same 10% of the average. I still don't get that part.
1 Answer
- SandyLv 71 decade agoFavorite Answer
2(a)(i) Calculate the profits or losses on disposals during the year ended 30 April 2010
Things to remember while tackling this question: the financial y/e is 30 April, and Depreciation is charged for the full year on all non-current (fixed) assets held at the yearend (regardless of when you purchased the asset).
I hope you've figured out the depreciation rates: 10% p.a. for machinery and 25% p.a. for motor vehicles.
Machinery disposed of in Dec 2009-
This was bought on 1.7.05, so it's been depreciated 4 yrs.
Cost $400,000
Accum depr ($160,000)
Nbv $240,000
Proceeds ($200,000)
Loss on disposal $40,000
M.V. disposed of on 1 April 2010-
These were bought on 1 March 2007, so have been depreciated 3 yrs
Cost $400,000
Accum depr ($300,000)
Nbv $100,000
Proceeds ($120,000)
Gain on disposal $20,000
M.V. in accident on 2 Dec 2009-
This was bought on 31.1.09, so has been depreciated 1 year
Cost $360,000
Accum depr ($90,000)
Nbv $270,000
Proceeds ($210,000)
Loss on disposal $60,000
2(a)(ii) Prepare a schedule of non-current (fixed) assets for the year ended 30 April 2010
Non-current (fixed) assets ..... .....Machinery ..... ..... ..... ..... Motor vehicles
........... .............. ............. ............. ....$000 ....... ........... ......... .......$000
Cost at 1 May 2009 ...... .......... ......4700 ........ ............. .......... ...3000
Additions during year ........... .......... 900 ............ .............. .......... 840
Disposals during year ......... ...........(400) .......... ................. ........(760)
Cost at 30 April 2010 ............... .....5200 ........... ............... ........ .3080
Depreciation at 1 May 2009 ...... ....1510 ............. .......... .......... ...790
Add charge for year .......... ............ ...520 ......... ........... ........... ......770
Less disposals for year ............ .......(160) .......... ............. ......... ..(390)
Depreciation at 30 April 2010 ...... ..1870 ............. ............ ....... ..1170
Net book value at 30 April 2010 ... . 3330 ........ ........... ........... ....1910
I think you can answer the rest yourself.
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Edit
No, the 10% must be uniform for that whole class of asset. You can't have one machine depreciated at 10% and another at 12% and yet another at 15%. The accountant would go bonkers keeping track of all this.