Answer to Question #248129 in Accounting for SHAN

Question

REQUIRED Study the information given below and answer the following questions: 5.1 Calculate the profit or loss on the disposal of the equipment. (5) 5.2 Prepare the following note to the financial statements as at 28 February 2020: * Property, plant and equipment (15) INFORMATION The following balances appeared in the general ledger of Umzinto Traders on 01 March 2019, the beginning of the financial year:

Vehicles 300 000 Accumulated depreciation on vehicles 140 000 Equipment 130 000 Accumulated depreciation on equipment 75 000 Additional information 1) A new vehicle, cost price R160 000, was purchased on credit on 01 December 2019. 2) Equipment with a cost price of R10 000, was sold for cash on 31 August 2019 for R2 000. The accumulated depreciation on the equipment sold amounted to R7 000 on 01 March 2019. 3) Depreciation is calculated on equipment at 10% per annum on cost. 4) Depreciation is calculated on vehicles at 20% per annum on the diminishing balance

Answer 1

5.1

Amount Sole equipment value on 1st Mar 2019 10,000

Depreciation on sold equipment 10% - Mar 19 to Aug 19 

10,000*10% /12 months * 6 months 500

Accumulated depreciation as on 1st Mar 2019 7,000 Accumulated depreciation as on 31st Aug 2019 7,500 Carrying value - Cost less accumulated depreciation 2,500 Sales value 2,000 Loss on sale of equipment          (500)

5.2

Notes to property, plant and equipment

Accounting policy

Property plant and equipment include vehicle and equipment and property, plant and equipment are presented at cost less accumulated depreciation.

Additions

A new vehicle for price of R 160,000 purchased during the year and valued at cost.

Disposal

A part of equipment which had a cost of R 10,000 and accumulated depreciation of 7,500 was sold for 2000. Loss on disposal on equipment has been recognized.

Depreciation

Depreciation is being calculated on equipment on the basis of straight line bases at the rate of 10%. And depreciation is being calculated on vehicle on the basis of diminishing balance method at the rate of 20%.

Impairment of property, plant and equipment.

No impairment is measured.