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Assignment FA1

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25 views

Assignment FA1

Uploaded by

manitsarr
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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Assignment (Chapter 9 & 10)

1. Delivery van cost $32,000 and was purchased on 1 January 2016.


It was depreciated at a rate of 25% using the reducing Balance method.

Prepare the depreciation schedule for 4 years.

2. -On 1 January 20X6, Freddie's Health Food Store had goods in inventory
valued at $11,000. During 20X6 its proprietor, who ran the shop,
purchased supplies costing $71,000. Sales turnover for the year to 31
December 20X6 amounted to $130,000. The cost of goods in inventory
at 31 December 20X6 was $22,000.

Calculate the gross profit for the year.


COGS=Opening Inventory + Net costs of Purchase−Closing Inventory

Given:

• Opening Inventory on 1 January 20X6 = $11,000


• Purchases during the year = $71,000
• Closing Inventory on 31 December 20X6 = $22,000
• Sales turnover for the year = $130,000

1. Calculate COGS:

COGS: 11,000 + 71,000 – 22,000 = $60,000


2. Calculate Gross Profit:

Gross Profit = Sales - COGS

= 130,000−60,000= $70,000

So, the gross profit is 70,000$

3. On 1 January 20X1 a business purchased a laser printer costing $1,500. The


printer has an estimated life of 3 years after which it will have no residual
value.
Required Calculate the annual depreciation charges for 20X1, 20X2, and 20X3 on
the laser printer on the straight-line basis.

1. Cost of Printer: $1,500


2. Useful Life: 3 years
3. Residual Value: $0

Using the straight-line method:

So, the annual depreciation charge for each year (20X1, 20X2, and 20X3) is $500.
4. - Delivery van cost £32,000 and was purchased on 1 January 2016. It was
depreciated at a rate of 25% using the reducing Balance method. The van was
sold for £13,000 on 1 January 2019 Required:

a). Prepare the depreciation schedule for 4 years.


• Cost of Delivery Van: £32,000
• Purchase Date: 1 January 2016
• Depreciation Rate: 25% (Reducing Balance Method)
• Sale Date: 1 January 2019
• Selling Price: £13,000

b). How much for profit or loss on disposal and entries to record the disposal
of the Van?

Book Value at Sale (1 Jan 2019): £13,500

Selling Price: £13,000

Calculation of Profit or Loss

Profit or Loss =Selling Price−Book


=£13,000−£13,500=−£500

This indicates a loss of £500 on the disposal.


Journal Entries
Accumulated Depreciation:

• Debit: Accumulated Depreciation £18,000


• Credit: Delivery Van £18,000

Loss on Disposal:

• Debit: Loss on Disposal of Van £500


• Credit: Delivery Van £500

Cash and Delivery Van Removal:

• Debit: Cash £13,000


• Credit: Delivery Van £32,000

5. A trader purchased a machinery for $20,000 in Jan 2004. Depreciation is


charged at 25% bass on straight line method. At 1 January 2006 it was sold for
$8,000. Required:
a). Calculate Profit or Loss on sale of machine

This indicates a loss of $2,000 on the sale of the machinery.


b). Provide Journal Double Entry for the Disposal of the machine

6. During May 20X7, Sarah's purchases were $140,500, and her sales were
$170,000. Sarah's gross profit was 25% of sales. The value of her inventory at 1
May 20X7 was $13,500. What was the value of Sarah's inventory at 31 May
20X7?

Opening inventory + Purchases – Cost of goods sold (COGS) = Closing inventory

Gross profit = Sales - COGS

Gross profit = 25% x Sales

=> COGS = Sales – Gross profit

=> COGS = Sales– 25% x Sales

=> COGS = 75% x Sales


$

Opening inventory 13,500

Purchases 140,500

–––––––

154,000

Less: COGS (75% of Sales) (127,500)

–––––––

Closing inventory 26,500

So, the value of Sarah's inventory at 31 May 20X7 is $26,500.

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