FIXED ASSETS QUESTIONS AND ANSWERS GRADE 12

More in this category: « VALUE ADDED TAX QUESTIONS AND ANSWERS GRADE 12 Budgeting Grade 12 - Accounting Grade 12 Study Guide and Notes »

Share via Whatsapp Join our WhatsApp Group Join our Telegram Group

Example
Vehicle is sold for R40 000 cash.
Cost price of vehicle: R100 000
Accumulated depreciation: R 90 000
Carrying value = R 10 000
Depreciation is calculated at 20% on Cost price

Additional depreciation: 100 000 × 20% = R20 000
The carrying value is already R10 000 and that means that depreciation can only be R10 000.
A fixed asset cannot be depreciated less than the cost price of the vehicle. (And not R9 999!)

ASSET DISPOSAL
Vehicle Profit on sale of asset	100 000 40 000 (Because the principle of R1 is not applied, the profit is R40 000) 140 000	Accum. depreciation Bank	100 000 40 000 140 000

Example 2 on note 3 in the Financial Statements
REQUIRED:
Complete Note 3 of the Balance sheet
INFORMATION:
Make use of the format and complete Note 3 from the financial Statements.
Name of Company _________________________________
BALANCE SHEET AT ________________________________

	Notes
ASSETS
Non-current assets
Property, plant and equipment

NOTES TO THE BALANCE SHEET

3. Property, plant and equipment	Vehicles
Cost Price
Accumulated Depreciation
Carrying value on the last day of the previous year
Movements:
Additions at cost
Disposals at carrying value (book value)
Depreciation for the year
Carrying value on the last day of current year
Cost Price
Accumulated Depreciation
Carrying value on the last day of current year

Memorandum of example 1
Calculation of Depreciation and cost price and carrying value

SCHIE TRADERS NO.1 Asset register Percentage Depreciation: 20 % p.a. at cost price/straight line method Details of depreciation
Details	Annual depreciation Calculations	Accumulated depreciation	Book value or known as “Carrying value”
End of first year	80 000 × 20%= 16 000	16 000	64 000 (80 000 – 16 000)
End of second year	80 000 × 20%= 16 000	32 000	(80 000 – 32 000) 48 000
End of third year	80 000 × 20%= 16 000	48 000	32 000
End of fourth year	80 000 × 20%= 16 000	64 000	16 000
End of fifth year	80 000 × 20%= 16 000 15 999 (Cannot depreciate R16 000, because of the scrap value of R1. Therefore can only depreciate R15 999)	(64 000 + 15 999) 79 999	(80 000 – 79 999) R1

SCHIE TRADERS NO.2 Asset register Percentage Depreciation: 10 % p.a. at carrying value/ book value or called diminishing value Details of depreciation
Details	Annual depreciation Calculations	Accumulated depreciation	Book value or known as “Carrying value”
Cost price R20 000 End of first year	20 000 × 10% × 6/12 = 1 000	1 000	19 000
End of second year	19 000 × 10% = 1 900	(2 000 + 1 900) 2 900	(20 000 – 2 900) 17 100
End of third year	17 100 × 10% = 1 710	4 610	15 390
End of fourth year	15 390 × 10% = 1 539	6 149	13 851
End of fifth year	13 851 × 10% – 1 385, 10	7 534,10	12 465,90

Memorandum of example 2
REQUIRED:
Complete the note to the financial statements by using the given ledger accounts
Name of Company _________________________________
BALANCE SHEET AT ________________________________

	Notes
ASSETS
Non-current assets		230 000
Property, plant and equipment (at carrying value)		230 000

NOTES TO THE BALANCE SHEET

3. Property, plant and equipment	Vehicles
Cost Price	180 000
Accumulated Depreciation	(60 000)
Carrying value on the last day of the previous year	120 000
Movements:
Additions at cost (150 000 + 50 000)	200 000
Disposals at carrying value (100 000 – 25000)	(75 000)
Depreciation for the year (5 000 + 10 000)	(15 000)
Carrying value on the last day of current year	230 000
Cost Price	280 000
Accumulated Depreciation	(50 000)
Carrying value on the last day of current year	230 000

Published in Accounting Study Guide and Notes Grade 12

FIXED ASSETS QUESTIONS AND ANSWERS GRADE 12

Related items