Question about Past Paper Dec '05

numberjunky

Fellow students........

Here's a bit of a question that's got me stumped. Q2.1 Dec '05 exam

Got all other corrections but the disposal got me a little confused.

Why has that 10,000 been taken OUT of the Vehicle at cost account??

It may be the wording of the question that I've missed but as I see it, 10,000
was paid from bank for the new car which would go to Dr. V@C account...I hope!
Along with the 3500 trade in, this gives total value of new car as 13,500. The given answer for the Disposal account is also clear to me - it's just the balance between Dr 12000 and Cr 5856 (Acc Dep'n) and 3500 (P/X)

Vehicle at cost has the 12000 Cr for the Disposal but I have no idea why 10000 has also been taken OUT of the Vehicle @ cost account....Maybe it has got something to do with the 10000 from the bank but I just can't see it.

Read DATA on p14 of the question paper.

Thanks for help......and I'm sure there will be someone...:confused1:

numberjunky

Additional info........

Sorry - Forgot to say it is Intermediate Level

visha

I presume you are looking at the suggested answer and on the adjustment column there is a credit of £10,000 against Vehicle at Cost?

The reason is that there should only be a debit of £3,500 on the debit side of the adjustment column against Vehicle at Cost and NOT £13,500. (as £10,000 has already been debited to MV@cost and credited to the bank a/c when a cheque was issued) and therefore an ajustment of 10,000 is needed on the credit side.

Remember these are suggested/guidance answers: Your net balance on the Motor vehicle a/c should be (12,000 + 13,500 – 12,000 = 13,500)

When you work out the balance on the suggested answer it is (22,000 + 13,500 – 12,000 – 10,000(adjustment) = 13,500)

The journals should have been (J1,J2,and J3)

Disposal a/c............J1..................12,000
Disposal.................J2................................5,856
Disposal.................J3................................3,500.........Net Loss 2,644

Acc. Depreciation....J2...................5,856

Bank a/c (MV@Cost).................................10,000

Motor Vehicle at cost.....J1........................12,000
Motor Vehicle at cost.....J3............3,500 .................(Answer Error Here-debit.as13,500)

Bank........................................10.000...............New Bal c/d 13,500

The Error on the answer is indicated above.

numberjunky

Thank you visha,

You posted a very in depth answer and your input was appreciated.

Sorry I took so long to reply

Kevin

sainty

task 2.1

i've just posted a question about this task, the wording in the data is quite confusing, and ambiguous. Visha's reply has clarified the matter. my own understanding is that that Vehicles at cost figure of £22000 already includes £10,000 as does the Bank figure of £3532.