QUESTION 1 - Case study

Suppose that an asset had a cost of R10,000 and Accumulated Depreciation of R6,000, at the end of last year (2020). During the current year (2021) additions were made to the asset which enhanced its value by R400. The depreciation rate is 10%, calculated on a straight-line basis.

You are required to:

1.

(a) Calculate current depreciation

(b) Book value and

(c) the profit/(loss) if the asset is sold for R4600

2. Show how the above transaction will be disclosed in the Annual Financial Statements of the Municipality for the year ended 30 June 2021 .i.e.

(I) Statement of Financial Performance (Income Statement)

(II) Statement of Financial Position (Balance Sheet)

(III) Statement of Cash Flow

(IV) Notes to the Annual Financial Statement

Clue: You need to show calculations and disclosure for the following items:

1. Depreciation

2. Profit / (Loss) on disposal of asset

3. Cost

4. Additions to / acquisition of assets

5. Accumulated Depreciation

6. Net Book Value

7. Proceeds on sale of asset

8. Notes to the Financial Statements - Accounting policy, Income statement and Balance sheet notes