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ASpiridi


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Can someone help please?
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doing my mock for ICB3, have a question which do not quite understand the situation. Listen to this: a new computer has been bought at a year end at a cost of 2000; the old computer has been scrapped for no proceed. The original computer was held in the accounts at a cost of 1000 with accumulated depreciation of 750. There are no VAT charged on the new computer, and the FULL AMOUNT was placed on hire purchase.
In addition says that computer equipment is to be depreciatied at a rate of 50% reducing balance method.

Also in the trial balance

Computer equipment Dr 4000
Computer eq depre    Cr        2000

your help is much appreciated

__________________
MarkS


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Posts: 1501
Date:
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Hi ASpiridi

Easiest way is to break it all down

Buying new computer at £2k on HP without VAT

Dr Computer Equipment Cost £2k
Cr Hire Purchase                     £2k

Journal to get rid of the old computer is

Cr Compuer Equipment Cost £1k
Dr Depn (BS)   £750
Dr Loss on Disposal (P&L) £250

So now your TB will look like this before depn charge for year

Computer Cost Dr £5k (£4k + £2k - £1k)
Depn                 Cr £1250 (£2k - £750)
HP                     Cr 2k
Loss on Disp     Dr £250

As the depreciation is 50% RB the journal for Depn for the year is

Depn P&L        Dr  £1875
Depn BS           Dr  £1875

This is 50% of £3750 (£5k - £1250)

So TBL would now look like

Computer Cost   Dr £5k
Depn BS              Cr £3125
HP                       Cr £2k
Loss on Disp      Dr £250
Depn P&L           Dr £1875

Dont know how the font sizes changed

MarkS

Hopefully got sums right without calculator at 1.30 in morning



__________________

Mark Stewart CA

http://stewartaccounting.co.uk/

Providing accounting, bookkeeping, payroll and tax services to small and medium sized businesses across Central Scotland and beyond.
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