August 20X6 lorry A was sold for £7,000

(iii) 21 August 20X6 lorry A was sold for £7,000

7 June 20X6 lorry D was purchased for £32,800

(iv) 30 October 20X6 lorry E was purchased for £39,000 (v)

6 March 20X7 lorry E was considered not to be suitable for carrying the type of goods required and was exchanged for lorry F. The value of lorry F was deemed to be £37,600.

Required:

Prepare the ledger T-accounts recording these transactions for the year ending 31 March 20X7 and bring down the balances at 1 April.

27.16 XY Ltd provides for depreciation of its machinery at 20% per annum on cost; it charges for a full year in the year of purchase but no provision is made in the year of sale/disposal.

Financial statements are prepared annually to 31 December.

20X5

January 1 Bought machine ‘A’ £10,000 July 1

Bought machine ‘B’ £6,000.

Chapter 27 l Double entry records for depreciation

20X6

March 31 Bought machine ‘C’ £8,000

20X7

October 7 Sold machine ‘A’ – proceeds £5,500 November 5 Bought machine ‘D’ £12,000

20X8

February 4 Sold machine ‘B’ – proceeds £3,000 February 6 Bought machine ‘B’ £9,000 October 11 Exchanged machine ‘D’ for a motor vehicle valued at £7,000

Prepare

(a) The machinery account for the period 1 January 20X5 to 31 December 20X8. (b) The accumulated provision for depreciation on machinery account, for the period 1 January

20X5 to 31 December 20X8. (c) The disposal of machinery accounts showing the profit/loss on sale for each year. (d) The balance sheet extract for machinery at (i) 31 December 20X7 and (ii) 31 December 20X8.

27.17A

A company maintains its fixed assets at cost. Accumulated provision for depreciation accounts are kept for each asset.

At 31 December 20X8 the position was as follows:

Total Cost To Date

Total Depreciation To Date

Office furniture

The following transactions were made in the year ended 31 December 20X9: (a) Purchased – machinery £2,480 and office furniture £320

(b) Sold machinery which had cost £2,800 in 20X5 for £800 Depreciation is charged, on a straight line basis, at 10% on machinery and at 5% on office furni-

ture 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 accounts for the year 31 December 20X9 and the relevant balance sheet entries at that date.

27.18 Alice Burke prepares her financial statements on 31 December each year and maintains a Plant and Equipment register at cost. She provides depreciation for the full year on fixed assets which are in use at the end of the year, and none in the year of disposal.

At 31 December 20X3 the plant account balance was £180,000 and the balance on the accumu-

lated provision for depreciation account was £70,000. Depreciation is provided on the reducing balance method at 20%.

Early in 20X6, an item of plant which had cost £20,000 on 1 March 20X4 was sold for £14,000. At the end of 20X6, it was decided that for that and all succeeding years the straight line

method of calculating depreciation should be used. It was assumed that all the plant would be sold at the end of 20X9 for approximately £30,000.

Required:

Prepare the ledger accounts recording all of the above.

27.19A

(a) The following trial balance was extracted from the books of M Jackson on 30 April 20X7. From it, and the note below it, prepare his trading and profit and loss account for the year ending 30 April 20X7, and a balance sheet as at that date

Part 4 l Adjustments for financial statements

Stock 1 May 20X6

Carriage outwards

Carriage inwards

Returns inwards

Returns outwards

Salaries and wages

Motor expenses

Sundry expenses

Motor vehicles

Fixtures and fittings

Cash at bank

Cash in hand

Note: Closing stock amounted to £4,000. Depreciation is to be charged at rates of 10% on cost for Fixtures and Fittings and 25% on cost for Motor Vehicles. Bad debts of £800 are to be written-off.

(b) Michael has indicated that he thinks that the debtors that have been written-off will pay eventually. He is also querying why adjustments are made in the financial statements for bad debts and depreciation. Write a short note to him, making appropriate references to account- ing concepts, outlining why these adjustments are made.

You can find a range of additional self-test questions, as well as material to help you with your studies, on the website that accompanies this book at www.pearsoned.co.uk/wood You can find a range of additional self-test questions, as well as material to help you with your studies, on the website that accompanies this book at www.pearsoned.co.uk/wood

Accruals and prepayments and

other adjustments for financial statements