Hi to all, i'm new here and i have an aat accounts preparation exam coming up soon and i'm having problems understanding part of the answer to this past exam question i've posted below!
Regarding the equipment accumulation depreciation account, the answer gives two credit entries of £430 (depreciation charge existing) and £850 (depreciation charge new).
what i don't understand is where the £430 comes from, could anyone please help? and i apologize if this post is a little long!
THE QUESTION
Katy's cakes is a sole trader business that is registered for vat. Her year end is 30/04/X0.
A new industrial sized cake mixer has been acquired. VAT can be reclaimed on this piece of equipment.
The asset was purchased for cash and cost £8,500.
The depreciation policy for equipment is 10% per annum on a reducing balance basis.
Depreciation on existing equipment has not been accounted for in the year ended 30/04/X0.
Make entries to account for
a)the purchase of the new equipment
b) the depreciation on the existing assets
c) the depreciation on the new equipment
On each account, show clearly the balance carried down or transferred to the P&L account
(the question then gives the following T accounts with some debits and credits already recorded)
The equipment at cost T account has one debit entry of £6,200 (bal b/d).
The equipment accumulated depreciation T account has one credit entry of £1,900(bal b/d).
The depreciation charge T account has a debit entry of £3,000 (bal b/d).
ooh, an exam question :) The equipment at cost is £6,200 less the accumulated depreciation of £1,900 gives a written-down book value of £4,300. The depreciation policy is 10% reducing balance, so 10% of £4,300 gives you your £430.
[edit: to correct grammar - replace "is" with "gives"]
-- Edited by Figurate on Tuesday 16th of August 2011 09:45:49 AM
Such a good post! I am preparing for the law exam and I keep looking for questions to practice online. It was wonderful coming across this post.<< link removed >>I am studying very hard for my exam and I am sure I will make it this time.
Such a good post! I am preparing for the law exam and I keep looking for questions to practice online. It was wonderful coming across this post. It will surely add to my (link deleted) I am studying very hard for my exam and I am sure I will make it this time.
And you are a moron - this is not a frickin law website.
SPAM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I deleted the same link for a different new userid yesterday. I don't believe in coincidences. bye.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I deleted the same link for a different new userid yesterday. I don't believe in coincidences. bye.
Hi Shaun, saw the post and link you mention yesterday and I was going to label it as VEIS until I saw who the post before it was and thought that if you deleted it then here we go again with it looking like I am calling your post VEIS.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
