Disposal accounts; questions
Question 1
A business has its financial year end on 31 December. The business bought machinery W, X, Y and Z
as follows;
Machinery Cost Date
W $8 000 1 January 2001
X $5 000 1 January 2001
Y $9 000 1 July 2003
Z $7 200 1 October 2003
The first two machines are sold, W for $2 290 on 30 September 2004 and the second one X is sold
for scrap for $50 on 30 June 2005.
Depreciation is on the straight line basis, 20% per annum, ignoring scrap value.
Required
a. accumulated provision for depreciation account
b. machinery account
c. disposal account
d. income statement extracts
e. statement of financial position (balance sheet) extracts
Question 2
A business purchased a non-current asset on 1 January 2001 for $25 000, with an estimated life of
six years and an estimated residual value of $7 000. The asset was sold after three years on 1
January 2004 for $17 500.
Required
a. accumulated provision for depreciation account
b. asset account
c. disposal account
d. income statement extracts
e. statement of financial position (balance sheet) extracts
Question 3
A non-current asset was purchased for $82 000. It was later on sold for $53 000 when the
accumulated depreciation was $42 000. Disposal costs were $2 000.
Required
a. non-current asset ledger account
b. accumulated depreciation ledger account
c. income statement ledger account
d. cash account
Question 4
A business has a financial year end 0f 31 December. A laptop is bought for $2 000 on 1 January 2005.
It is to be depreciated at the rate of 20% per annum using reducing balance method. It was later sold
on 2 January 2006 for $1 070.
Required
e. accumulated provision for depreciation account
f. asset account
g. disposal account
h. income statement extracts
i. statement of financial position (balance sheet) extracts
Question 5
A company maintains its non-current assets at cost. Accumulated provision for depreciation
accounts are kept for each asset.
At 31 December 2008, the position was as follows;
Total cost to date Total depreciation to date
$ $
Machinery 52 950 25 670
Office furniture 2 860 1 490
The following transactions were made in the year ended 31 December 2009;
a. purchased – machinery $2 480 and office furniture $320
b. sold machinery which had cost $2 800 in 2005 for $800
Depreciation is charged on a straight line basis, at 10% on machinery and at 5% on office furniture
on the basis of assets in use at the end of the year irrespective of the date of purchase.
Required
Show the asset and accumulated provision for depreciation account for the year 31 December 2009
and the relevant balance sheet entries at that date.
