Fixed Assets Questions and Answers | Accounting Grade 12
Example
Vehicle is sold for R40 000 cash.
Cost price of vehicle: R100 000
Accumulated depreciation: R 90 000
Carrying value = R 10 000
Depreciation is calculated at 20% on Cost price
- Additional depreciation: 100 000 × 20% = R20 000
- The carrying value is already R10 000 and that means that depreciation can only be R10 000.
- A fixed asset cannot be depreciated less than the cost price of the vehicle. (And not R9 999!)
| ASSET DISPOSAL | |||
| Vehicle Profit on sale of asset | 100 000 40 000 (Because the principle of R1 is not applied, the profit is R40 000) 140 000 | Accum. depreciation Bank | 100 000 40 000 140 000 |
Example 2 on note 3 in the Financial Statements
REQUIRED:
Complete Note 3 of the Balance sheet
INFORMATION:
Make use of the format and complete Note 3 from the financial Statements.
Name of Company _________________________________
BALANCE SHEET AT ________________________________
| Notes | |
| ASSETS | |
| Non-current assets | |
| Property, plant and equipment |
NOTES TO THE BALANCE SHEET
| 3. Property, plant and equipment | Vehicles |
| Cost Price | |
| Accumulated Depreciation | |
| Carrying value on the last day of the previous year | |
| Movements: | |
| Additions at cost | |
| Disposals at carrying value (book value) | |
| Depreciation for the year | |
| Carrying value on the last day of current year | |
| Cost Price | |
| Accumulated Depreciation | |
| Carrying value on the last day of current year |
Memorandum of example 1
Calculation of Depreciation and cost price and carrying value
| SCHIE TRADERS NO.1 Asset register Percentage Depreciation: 20 % p.a. at cost price/straight line method Details of depreciation | |||
| Details | Annual depreciation Calculations | Accumulated depreciation | Book value or known as “Carrying value” |
| End of first year | 80 000 × 20%= 16 000 | 16 000 | 64 000 (80 000 – 16 000) |
| End of second year | 80 000 × 20%= 16 000 | 32 000 | (80 000 – 32 000) 48 000 |
| End of third year | 80 000 × 20%= 16 000 | 48 000 | 32 000 |
| End of fourth year | 80 000 × 20%= 16 000 | 64 000 | 16 000 |
| End of fifth year | 80 000 × 20%= 16 000 15 999 (Cannot depreciate R16 000, because of the scrap value of R1. Therefore can only depreciate R15 999) | (64 000 + 15 999) 79 999 | (80 000 – 79 999) R1 |
| SCHIE TRADERS NO.2 Asset registerPercentage Depreciation: 10 % p.a. at carrying value/ book value or called diminishing value Details of depreciation | |||
| Details | Annual depreciation Calculations | Accumulated depreciation | Book value or known as “Carrying value” |
| Cost price R20 000 End of first year | 20 000 × 10% × 6/12 = 1 000 | 1 000 | 19 000 |
| End of second year | 19 000 × 10% = 1 900 | (2 000 + 1 900) 2 900 | (20 000 – 2 900) 17 100 |
| End of third year | 17 100 × 10% = 1 710 | 4 610 | 15 390 |
| End of fourth year | 15 390 × 10% = 1 539 | 6 149 | 13 851 |
| End of fifth year | 13 851 × 10% – 1 385, 10 | 7 534,10 | 12 465,90 |
Memorandum of example 2
REQUIRED:
Complete the note to the financial statements by using the given ledger accounts
Name of Company _________________________________
BALANCE SHEET AT ________________________________
| Notes | ||
| ASSETS | ||
| Non-current assets | 230 000 | |
| Property, plant and equipment (at carrying value) | 230 000 |
NOTES TO THE BALANCE SHEET
| 3. Property, plant and equipment | Vehicles |
| Cost Price | 180 000 |
| Accumulated Depreciation | (60 000) |
| Carrying value on the last day of the previous year | 120 000 |
| Movements: | |
| Additions at cost (150 000 + 50 000) | 200 000 |
| Disposals at carrying value (100 000 – 25000) | (75 000) |
| Depreciation for the year (5 000 + 10 000) | (15 000) |
| Carrying value on the last day of current year | 230 000 |
| Cost Price | 280 000 |
| Accumulated Depreciation | (50 000) |
| Carrying value on the last day of current year | 230 000 |
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Originally posted 2024-02-22 12:49:31.