Baako Ltd purchased motor vehicle as follows: Date... | WAEC SSCE - Financial Accounting - 2018

Question 1 Report

Baako Ltd purchased motor vehicle as follows:

Date	Quantity	N
01/01/13	1	800,000
01/07/13	1	400,000
01/04/15	1	600,000

The company adopts a straight-line method of depreciation at the rate of 10% per annum from the date of purchase. A separate account is prepared for provision for depreciation. On 30h June 2014, the motor vehicle which was purchased on 1st July 2013 was sold for N6 240,000

You are required to prepare:
(a) Motor Vehicle Account for the year, 2013, 2014, and 2015.
(b) Provision for Depreciation on Motor Vehicle Account for the years 2013, 2014, and 2015.
(c) Motor Vehicle Disposal Account.

Answer

Answer Details

Approach. Depreciation is straight-line at 10% per annum from the date of purchase, so part-year assets get a proportionate charge. A separate provision account accumulates depreciation, and on disposal the cost and its accumulated depreciation are transferred to a Disposal Account against the sale proceeds.

Depreciation workings (10% per annum)

Vehicle 1 (N800,000, bought 01/01/13): 80,000 per full year.
Vehicle 2 (N400,000, bought 01/07/13): 40,000 per year -> 2013 = 20,000 (6 mths); to sale on 30/06/14 = 20,000 (6 mths).
Vehicle 3 (N600,000, bought 01/04/15): 2015 = 45,000 (9 mths).

(a) Motor Vehicle Account (at cost)

Dr	N	Cr	N
2013 Jan 1 Bank	800,000
2013 Jul 1 Bank	400,000	2013 Dec 31 Bal c/d	1,200,000
	1,200,000		1,200,000
2014 Jan 1 Bal b/d	1,200,000	2014 Jun 30 Disposal	400,000
		2014 Dec 31 Bal c/d	800,000
	1,200,000		1,200,000
2015 Jan 1 Bal b/d	800,000
2015 Apr 1 Bank	600,000	2015 Dec 31 Bal c/d	1,400,000
	1,400,000		1,400,000

(b) Provision for Depreciation on Motor Vehicle Account

Dr	N	Cr	N
2013 Dec 31 Bal c/d	100,000	2013 Dec 31 P&L (80,000 + 20,000)	100,000
2014 Jun 30 Disposal	40,000	2014 Jan 1 Bal b/d	100,000
2014 Dec 31 Bal c/d	160,000	2014 Dec 31 P&L (80,000 + 20,000)	100,000
	200,000		200,000
2015 Dec 31 Bal c/d	285,000	2015 Jan 1 Bal b/d	160,000
		2015 Dec 31 P&L (80,000 + 45,000)	125,000
	285,000		285,000

(c) Motor Vehicle Disposal Account

Dr	N	Cr	N
Motor Vehicle (cost)	400,000	Provision for depreciation	40,000
		Bank (sale proceeds)	240,000
		P&L (loss on disposal)	120,000
	400,000		400,000

Note. Net book value at sale = 400,000 - 40,000 = 360,000; sold for 240,000, giving a loss on disposal of N120,000. (The proceeds figure in the question, N6 240,000, is read as N240,000.)

Read lesson note on Nature And Significance Of Accounting (JAMB)

Nature And Significance Of Accounting

View Answer

Baako Ltd purchased motor vehicle as follows: Date Quantity N 01/01/13 1 800,000 01/07/13 1 400,000 01/04/15 1 600,000 The company adopts a straight-line me...

Download The App On Google Playstore

Baako Ltd purchased motor vehicle as follows: Date Quantity N 01/01/13 1 800,000 01/07/13 1 400,000 01/04/15 1 600,000 The company adopts a straight-line me...

Related Questions

Download The App On Google Playstore