Chemo ltd leader in laboratory items manufacture lab reagents. As part of its renovation the company has
Question:
Chemo ltd leader in laboratory items manufacture lab reagents. As part of its renovation the
company has obtained a bank loan of $25m on 1st January 2010 to finance replacement of old
machinery and equipment with the state of art facilities. The following transactions were
undertake for the period ended 31st December,2016.
1. January 2016: old machinery that had been bought in 2014 for sh. 3m was sold for $1.0m. A new replacement machine was acquired at a cost of $4m.
2. April 2016: Air conditioner equipment purchased for $3,000,000 at the time with the
machinery disposed was scrapped since it was no longer of useful value. It was replaced
at a cost of $3,000,000.
3. July 2016. The company disposed of freehold land for 16m, the same had been acquired
in 2013, for $1m. Instead the company bought a 50 years leasehold piece of land in a
prime area for $28m. This is intended to facilitate future expansion.
4. October 2016 the company previously had only one distribution van bought in 2013 for
$1.5m. This was disposed off at $700,000 and instead 2 new vans bought at $1.6 each.
5. December 2016 owing to change in technology, computer accessories bought in 2012 for
$3m were considered obsolete ad discarded. These were replaced with new
accessories at a cost of $10m. More information:
1. Depreciation of assets is on straight line method at the following rates;
Motor vehicles 20%
Equipment 25%
Machinery 20%
Computers 25%
2. Full depreciation is charged in the year of purchase and depreciation in the year of
disposal
Required:
Prepare extracts of the ledgers for the period ending 31 December 2016.
a) Assets account (10 Marks)
b) Depreciation Account (6 Marks)
c) Disposal Account (4 Marks)
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen