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NCA-Dep, Part Exchange.docx

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Concordia University
ACCO 240

Question 1 At 1 October 2002 Jim had fixed assets as follows: Freehold Land Buildings Machinery $ $ $ Cost 85,000 120,500 74,800 Accumulated depreciation nil 28,920 35,600 Jim’s policy is to provide for a full year’s depreciation in the year of acquisition, but no provision is made in the year of disposal. Depreciation is provided at the following rates: • Land nil • Buildings written off over 25 years, on the straight line basis • Machinery 20% per annum, on the reducing balance basis During the year to 30 September 2003, Jim added an extension to the buildings at a cost of $6,800. He also acquired a new machine, by paying the dealer $9,000 by cheque and trading in an old machine for $5,500. The machine traded in had been acquired in January 2000 at a cost of $11,000. Jim has asked why depreciation is not charged on the land, but is charged on other fixed assets. Required: (a) As at 30 September 2003, calculate: (i) The value of Jim’s non-current assets, before deducting depreciation; (3 marks) (ii) The accumulated depreciation; (4 marks) (iii) The net book value of non-current assets. (1 mark) (b) Calculate the profit or loss on the machine which was traded in. (3 marks) (c) Draft brief notes which explain why depreciation should be charged on the non-current assets other than freehold land. (4 marks) Question 2 1 Simon depreciates his machinery at a rate of 20% per annum on a reducing balance basis. He provides a full year’s depreciation in the year an asset is acquired, and no provision is made in the year of disposal. At 1 November 2003, the cost of Simon’s machinery was $140,900, and the net book value was $94,570. During the year to 31 October 2004, a machine which had cost $35,000 and had been depreciated for four years was traded in for a new machine. The new machine cost $50,000, and the trade in value was $14,000. At 31 October 2004 the balance of the cost of the new machine was still outstanding. Required: (a) Calculate the profit or loss on the machine traded in. (3 marks) (b) Calculate the depreciation charge for machinery for the year to 31 October 2004. (2 marks) (c) Show the following ledger accounts for the year: (i) Machinery at cost; (4 marks) (ii) Accumulated depreciation. (3 marks) (d) Calculate the total charge to be reported in the income statement for the year to 31 October 2004 in respect of machinery. (1 mark) (e) State the balances to be reported in the balance sheet as at 31 October 2004 as a result of these transactions. (2 marks) Question 3 Carol Dolby’s balance sheet at 31 May 2005 reported her motor vehicles as follows: Cost Accumulated Depreciation Net book Value $ $ $ 170,000 62,000 108,000 During the year to 31 May 2006, Carol scrapped a van and part exchanged an old car for a new car. The van had been bought in Janu
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