3

On 20 April, Goldy received the following bank statement. For

Examiner’s
Dr Cr Balance Use
$ $ $
April 1 Balance b/d 650 Cr
8 Pacific Traders 1500 2150 Cr
12 Kwan 730 1420 Cr
15 Interest 12 1408 Cr
16 Credit transfer (dividends) 130 1538 Cr

REQUIRED

(c) Update the cash book for Goldy on 20 April. Balance the cash book on that date.

Cash book (bank columns only)

$ $

April 1 Balance b/d 650 April 12 Kwan 730

8 Pacific Traders 1500 17 Headland Garage 75

18 Stanton & Co 96

[4]

(d) Prepare the bank reconciliation statement at 20 April.

Bank reconciliation statement at 20 April 2010

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

...................................................................................................................................... [4]

[Total: 19]
© UCLES 2010 7110/21/M/J/10 [Turn over
 4

2 Sparky Ltd set up business on 1 May 2008 with the following assets: For
Examiner’s
$ Use
Property (Land and buildings) 150 000
Computer equipment 40 000
Inventory (stock in trade) 70 000

Sparky Ltd decided on the following policy for depreciation:

1 Land costing $80 000 was not to be depreciated.

2 Buildings are to be depreciated at 2% per annum on cost using the straight line method.

3 Computer equipment is to be depreciated at 25% per annum using the diminishing

(reducing) balance method.

REQUIRED

(a) State two causes of depreciation.

(i) ..................................................................................................................................

(ii) .............................................................................................................................. [2]

(b) Explain why Sparky Ltd does not depreciate each of the following:

(i) Land

..................................................................................................................................

..................................................................................................................................

(ii) Inventory (stock in trade)

..................................................................................................................................

.............................................................................................................................. [4]

(c) Explain why depreciation is an application of the matching/accruals principle.

..........................................................................................................................................

..........................................................................................................................................

...................................................................................................................................... [2]

(d) Calculate the depreciation on property (land and buildings) for the year ended
30 April 2009.

..........................................................................................................................................

...................................................................................................................................... [1]

© UCLES 2010 7110/21/M/J/10

 5

On 30 April 2010 Sparky Ltd sold some of the computer equipment for $7000. The computer For
equipment had cost $12 000 on 1 May 2008. Sparky Ltd charges a full year’s depreciation in Examiner’s
the year of disposal. Use

REQUIRED

(e) Prepare the disposal account on 30 April 2010 recording the disposal of the computer
equipment.

Disposal account

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

...................................................................................................................................... [5]

During the year ended 30 April 2010, Sparky Ltd carried out work on the buildings.

1 Built an extension

2 Redecorated the interior

3 Installed air conditioning

REQUIRED

(f) State whether each item, 1 to 3 above, is capital expenditure or revenue expenditure.

1 .......................................................................................................................................

2 .......................................................................................................................................

3 ................................................................................................................................... [3]

[Total: 17]

© UCLES 2010 7110/21/M/J/10 [Turn over