Mario owns a business which has a financial year end of 30 September 2022 . The table
Question:
Mario owns a business which has a financial year end of 30 September 2022. The table below includes the account balances of the business.
Balance sheet accounts | Dr | Cr |
£ | £ | |
Fixtures and fittings at cost (at 30/9/2021) | 180,000 | |
Fixtures and fittings at cost – accumulated depreciation (at 30/9/2021) | 60,000 | |
Motor vehicles at cost (at 30/9/2021) | 90,000 | |
Motor vehicles – accumulated depreciation (at 30/9/2021) | 45,000 | |
Receivables (at 30/9/2022) | 172,000 | |
Allowance for irrecoverable receivables (at 30/9/2021) | 6,700 |
The following information is relevant:
Depreciation on fixtures and fittings is provided at 10% per annum on the straight-line basis, assuming no residual value.
Motor vehicles are depreciated at 25% per annum using the reducing balance method.
There were no additions and disposals of non-current assets during the year.
Mario estimates that £7,100 due from customers will be irrecoverable and must be written off.
The allowance for irrecoverable receivables is to be set at 5% of net receivables at 30 September 2022.
Required:
a.Prepare the non-current assets note using the layout shown in the table below. Show your workings.
Non-current assets | Fixtures and fittings | Motor vehicles | Total |
Cost | £ | £ | £ |
At 30 September 2021 | |||
Additions | |||
Disposals | |||
At 30 September 2022 | |||
Accumulated depreciation | |||
At 30 September 2021 | |||
Charge for the year | |||
Depreciation on disposal | |||
At 30 September 2022 | |||
Carrying amount (Net Book Value) | |||
At 30 September 2021 | |||
At 30 September 2022 |
b.Explain why Mario has chosen his current depreciation policy towards fixtures and fittings and motor vehicles.
c.
i.Explain why computers can sometimes be accounted for as inventory and sometimes as non-current assets in a business. (2 marks)
ii.What type of expenditure is a large, sturdy office stapler that is valued at £5, and expected to last two years? Justify your answer. (3 marks)
d.Calculate the increase or decrease in the allowance for irrecoverable receivables for the year ending 30 September 2022.
e.State the figure that will be shown on the face of the balance sheet for receivables at the year-end 30 September 2022.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon