- 20 Marks
FA – Nov 2015 – L1 – SB – Q3 – Depreciation Methods and Accounting for Disposals
Calculate depreciation rate and amounts, then post transactions to relevant ledger accounts.
Question
a. On January 1, 2013, Ajanaku Enterprises bought a motor vehicle for N1,850,000 with an estimated life span of four years and a residual value of N50,000.
i. Determine the depreciation rate, using the reducing balance method. (2 Marks)
ii. Using the rate of depreciation derived in (i) above, calculate the amount of depreciation for the years 2013 and 2014 respectively. Also, disclose the carrying amount of the asset at the end of December 31, 2014. (3 Marks)
b. The following transactions were recorded in the books of Lexus Enterprises for the three months ended March 31, 2014.
| Date | Description |
|---|---|
| Jan. 1 | Commenced business by introducing N250,000 into a bank. |
| Jan. 5 | Bought N50,000 furniture from Adam Enterprises on credit. |
| Jan. 15 | Bought office stationery for N1,000 paying by cheque. |
| Jan. 28 | Bought goods for resale worth N25,000 paying by cheque. |
| Feb. 2 | Paid Adam Enterprises a cheque of N35,000. |
| Feb. 3 | Rent of N30,000 for business premises was paid by cheque. |
| Mar. 5 | Bought goods on credit from Jay Enterprises for N35,000. |
| Mar. 8 | Bought office stationery for N500 paying by cheque. |
Required:
i. Post the above transactions in the relevant ledger accounts and balance the accounts. (15 Marks)
(Total 20 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Depreciation Calculation, Ledger Accounts, Reducing Balance Method
- Level: Level 1
- Topic: Depreciation Methods and Accounting for Disposals
- Series: NOV 2015