(a) Identify the four factors which cause non-current assets to depreciate. (b) Which one of these factors...
Question:
(a) Identify the four factors which cause non-current assets to depreciate.
(b) Which one of these factors is the most important for each of the following assets? (i) a gold mine; (ii) a van; (iii) a 50-year lease on a building; (iv) land; (v) a ship used to ferry passengers and vehicles across a river following the building of a bridge across the river; (vi) a franchise to market a new computer software package in a certain country.
(c) The financial year of Ochre Ltd will end on 31 December 2009. At 1 January 2009 the company had in use equipment with a total accumulated cost of £135,620 which had been depreciated by a total of £81,374. During the year ended 31 December 2009 Ochre Ltd purchased new equipment costing £47,800 and sold off equipment which had originally cost £36,000, and which had been depreciated by £28,224, for £5,700. No further purchases or sales of equipment are planned for December. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year’s depreciation is provided for on all equipment in use by the company at the end of each year. Required: Show the following ledger accounts for the year ended 31 December 2009: (i) the Equipment Account; (ii) the Provision for Depreciation on Equipment Account;Authors’ Note (iii) the Assets Disposals Account.
Step by Step Answer:
Frank Woods Business Accounting
ISBN: 9780273759287
12th Edition
Authors: Frank Wood. Sangster, Alan