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Poa T - 6

Bryan purchased a machine for his candy factory for RM127,200 which included transportation, freight insurance, and customs duty costs. He plans to use the machine for 6 years and then dismantle and sell it for scrap. Bryan uses the straight line and reducing balance depreciation methods. The summary calculates the annual depreciation and extracts of the machinery account, depreciation account, accumulated depreciation account, statement of profit or loss, and statement of financial position for the years ended 2018, 2019, and 2020.

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SHEVENA A/P VIJIAN
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110 views2 pages

Poa T - 6

Bryan purchased a machine for his candy factory for RM127,200 which included transportation, freight insurance, and customs duty costs. He plans to use the machine for 6 years and then dismantle and sell it for scrap. Bryan uses the straight line and reducing balance depreciation methods. The summary calculates the annual depreciation and extracts of the machinery account, depreciation account, accumulated depreciation account, statement of profit or loss, and statement of financial position for the years ended 2018, 2019, and 2020.

Uploaded by

SHEVENA A/P VIJIAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Tutorial 6 Non-Current Assets 1 LTJ 2022

Tutorial 6 – Accounting for Non-current assets Bryan hired an engineer to install the machine within the factory. The
engineer told Bryan that in the event Bryan wishes to dismantle the machine
Section A: in the future, it would cost him RM700. After the installation was
completed, the engineer billed him at RM1000.
1 (a) Describe capital expenditure and revenue expenditure. How are
they to be treated in the accounts? Bryan plans to use the machine for 6 years. Every year, the machine would
(b) What is depreciation? Explain. be maintained at a cost of RM350. In year 7, the machine will be dismantled
2 (a)What are the common methods of depreciation? Explain. and sold off as scrap for RM5,000.
(b) Compare depreciation with accumulated depreciation. Explain
how they are treated in the accounts. For every of his assets, Bryan adopts the policy to make full year
depreciation in the year of purchase.
3. State whether each of the following statements is True or False:
Required:
a. When as a business has an accumulated depreciation account of
RM4,000 for a particular non-current assets, it means the business (a) Calculate the cost of the machine.
has accumulated, or set aside this amount of cash for replacement
later. (b) Compute the annual depreciation for the years ended 31 Dec 2016,
b. Depreciation is the fall in value of non-current assets. 2017, 2018, 2019, 2020 and 2021 using the following depreciation
c. The straight line method is the depreciation method where basis:
decreasing amounts of depreciation are being charged to the
Statement of Profit or Loss over the years. (i) straight line
d. Net book value is the estimated value of non-current assets after (ii) reducing balance basis at the rate of 42% per annum
deducting accumulated depreciation.
e. Capital expenditure is incurred when a business spends money to (c) With your answer in (b) (ii) above, prepare for the years ended 31 Dec
buy or increase the value of non-current asset. 2018, 2019 and 2020:

(i) Machinery account


Question 4 (ii) Depreciation account
(iii) Accumulated depreciation account
Bryan operates a candy factory in Rawang. The machines in his factory are (iv) Statement of Profit or Loss (extract)
purchased overseas. On 1 Jan 2016, he purchased a machine from Korea (v) Statement of Financial Position (extract)
costing RM120,000. The machine was delivered to Malaysia on freight. The
transportation cost of RM3,000 and freight insurance of RM1,200 was borne
by Bryan. When the machine landed in Malaysia, Bryan paid custom duty of
RM3,000.
Tutorial 6 Non-Current Assets 2 LTJ 2022

Section B: Extra exercise questions (for students’ own practice)


(b) Prepare the Statement of Financial Position (extract) as at 31 December
Question 1 2020 and 2021 showing the non-current assets.

Genesis Trading currently has a problem in finalizing the depreciation


charges for the non-current assets. The bookkeeper has provided the Question 2:
following information as at 1 Jan 2020:
A car cost RM96,000. It will be kept for 3 years, and then sold for an
Non-current Accum Deprecation policy estimated value of RM24,000.
assets Cost (RM) Dep (RM)
Land 800,000 - - Required:
Motor vehicles 250,000 25,000 10% on cost Calculate depreciation for each year using:
Furniture Fittings 90,000 4,500 5% using reducing
balance method (c) Straight line method
(d) Reducing balance method, with depreciation rate of 37%
New purchases of non-current assets during the year 2020 and 2021:
2020 2021 Question 3
New Land at cost RM50,000 1. Furniture & fittings at cost
Asset RM8,000 If an asset cost RM100,000, reducing balance rate was 54% for 6 years
Purchase 2. Motor vehicles at cost useful life. The depreciation calculated would be RM53,584 in year 1.
d RM45,000 Show the journal entry to record depreciation charge at the end of year 1.

Depreciation is to be calculated on assets in existence at the end of each


year, giving full year’s depreciation in the year of acquisition.

Required:

(a) Prepare the following accounts for the year ended 31 Dec 2020 and
2021:
(i) Land account
(ii) Motor vehicle account
(iii) Furniture & Fittings account
(iv) Accumulated depreciation – Motor vehicles account; and
(v) Accumulated depreciation – furniture & fittings accounts (no
decimal, round up to the nearest RM)

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