DEPRECIATION OF NON CURRENT ASSETS ASSIGNMENT

QN

a) i) Define ‘depreciation’

ii) Briefly explain three methods of calculating depreciation.

b) Kawempe Royal bought van ‘A’ on 1^st Jan 2005 for Shs 8,000,000 and on 1^st April 2006, bought another van ‘B’ for Shs 6,000,000.

On 1^st July 2006 bought another van ‘C’ for Shs 5,000,000.

All purchases were by cheque.  Depreciation is calculated for the period an assets has spent in the company at a rate of 10% p.a

Required: for the first 3 years

• Prepare motor van A/C
• Provision for depreciation A/C
• Depreciation account
• Balance sheet as at that date

QN

(a) List three methods of calculating depreciation

(b) St. Henry’s college school bought a new van on 1^st Jan 2008 at 3,000,000/=. It was estimated to depreciate at a rate of 10% per annum on reducing balancing method.

Required

Show how the entries would appear for the first three years in the:

• Van account
• Provision for depreciation
• Depreciation account
• Profit and loss account
• Balance sheet

QN

(a) Define depreciation and explain any three methods of calculating depreciation

(b) A company maintains its assets accounts charging depreciation at 5 % p.a by fixed installment method. During the period of two years the following purchases took place

1^st Jan 2002 bought motor vehicle for cash shs 3,400,000

30^th April bought motor vehicle cash shs 4,000,000

1^st Jan bought motor vehicle cash shs 1,000,000

Prepare the following accounts for the year 2000, 2003, and 2004

(i) Motor vehicle’s account

(ii) Provision for depreciation on motor vehicles

(iii) Balance sheet

QN

A firm purchases a delivery van for business use at a cost of shs36, 000. The van is expected to have a three-year lifespan with no scrap value. Depreciation for the van will be charged by using either the straight line method or the reducing balance method (using a rate of 70% per annum).

Calculate the depreciation for each of the three years, using both methods

QN

A firm buys a truck for business use. The truck costs shs14, 000 and is expected to last three years with an estimated scrap value of shs3, 000.

Produce a table comparing the depreciation and net book values for each year of the asset’s life using the straight line and reducing balance methods of depreciation (take the rate of 40% for reducing balance).

QN

A firm purchases a delivery van for business use at a cost of shs36, 000. The van is expected to have a three-year lifespan with no scrap value. Depreciation for the van will be charged by using either the straight line method or the reducing balance method (using a rate of 70% per annum).

Calculate the depreciation for each of the three years, using both methods.

QN

A vehicle is purchased on 13 February 2017 for shs30, 000. It is to be depreciated using the reducing balance method at a rate of 20%.

Show the provision for depreciation account for the years 2017–2019 (assuming a full year’s depreciation is provided in the year of purchase).

QN

A machine is purchased on 1 January 2015 for shs20, 000 and is to be depreciated using the reducing balance method at a rate of 20%.

Show the provision for depreciation of machinery account for the years 2015, 2016 and 2017.

QN

Equipment is purchased on 30 June 2013 for shs15, 000 and is to be depreciated at 25% on cost on a monthly basis.

Show the provision for depreciation of equipment account for the years 2013, 2014 and 2015.

QN

The following non-current assets are purchased:

2012 may 1 equipment shs3, 000

2013 Jan 1 equipment shs2, 000

2014 mar 31 equipment shs4, 000

Depreciation is to be charged on equipment at the rate of 25% on cost and is provided on a proportionate basis. Show the provision for depreciation of equipment account for the years ended 31 December 2012–2014.

QN

Pierce ltd makes the following purchases of machinery:

1 January     2013 shs25, 000

1 July           2013  shs50, 000

31 march     2014 shs10, 000

All machinery is to be depreciated at 10% on cost on a monthly basis.

Show the provision for depreciation of equipment account for the years 2013, 2014 and 2015.

QN

A lorry is purchased on 30 June 2014 for shs10, 000. It is to be depreciated using one of the following two methods of depreciation:

(a) Straight line, on a monthly basis, with an expected scrap value of shs2, 000 and a lifespan of five years.

(b) Reducing balance, using 30%, with a full year’s depreciation charged in the year of purchase but none in the year of sale.