1. Vehicles are depreciated at 20% per annum on the straight-line basis.

2. The business considers the residual value on the vehicles to be 25% on cost.

3. Depreciation on equipment is calculated at 20% per annum on the diminishing-balance method.

4. Depreciation on machinery is calculated based on the units that the machine produces.

5. No depreciation has been recorded for the current year.

6. All amounts are VAT inclusive, unless otherwise stated.

7. All suppliers are considered to be registered VAT vendors.

Old assets:

• The machine in the trial balance was bought (and brought into use) on 15 November 19x8 at a total cost of R400 000 with no residual value.

• The machine had a capacity to complete/produce 35 000 units.

• For the years ending 31 August 19x9, 20x0 and 20x1 the number of units produced was 7 000, 14 000 and 10 500 units in the three respective years.\

• On 27 August 20x1, Simthandile Retailers sold this machine for R53 000 (VAT excluded) to a restoration company.

• The accountant was unfamiliar with the depreciation process and, therefore, has not processed any of the depreciation entries for the machine from the day it was brought into use.

• You may assume that VAT has been accurately accounted for in the respective VAT period.

New assets bought:

A Vehicle: 31 October 20x0
– A new car was bought from Flash Motors for an amount of R174 420.
– 90% of the purchase price of the car was financed through Ortel Bank. The other

10% was settled in cash.
– The vehicle was available for use on the same day.

B Machinery: 30 April 20x1
– Purchased a new machine from Machines-R-Us on credit for R334 020.

– The machine was delivered to Machine Adaptations on the same day. A stabiliser was fitted to the machine to ensure that the machine would be suitable for use in the factory.

– The cost of the stabiliser was R63 000 (VAT excluding) and was settled in cash.

– The business also paid a labour cost of R13 680 for the conversion to machine .

– It has been estimated that the machine will be able to produce 50 000 units.

– In the current year, a total of 8 000 units was produced from the day that the machine was brought into use.

Assets sold:

C Vehicle: 30 March 20x1

– Sold a vehicle for R71 820.

– The vehicle was bought on 1 July 19x7 at a total cost of R140 000 (VAT excluding) and was available for use on the same day.

You are required to

1. Record the transactions and depreciation in the general journal as at 31 August 20x1.

2. Complete the non-current assets note in the financial statements as at 31 August 20x1.

Transcribed Image Text:

Simthandile Retailers EXTRACT FROM THE TRIAL BALANCE AS AT 31 AUGUST 20x0 Details Debit 840 000 00 355 000 00 400 000 00 Vehicles Equipment Machinery Accumulated depreciation: Vehicles Accumulated depreciation: Equipment Fol. B3 B4 B5 B6 B7 Credit 140 000 00 120 000 00