Dec 05 Exam Task 2.1
sainty
Registered Posts: 21 New contributor 🐸
i've just completed this paper and thought everything was ok until i looked at the answers to Task 2.1. can anyine explain why there is a credit of £10,000 in the Vehicles at cost adjustment column, i thought there should only be £12,000 re the disposal of the vehicle. the amount on the debit side makes sense i.e £10,000 plus p/ex of £3500. why isn't there a credit of £10,000 against the Bank Acc.
the assessors comments make a reference to this question: the money was already out of the Bank and didn't need adjusted!!!!
the assessors comments make a reference to this question: the money was already out of the Bank and didn't need adjusted!!!!
0
Comments
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What they have done in the answer is to remove the debit entry of £10,000 in the Vehicles at cost account, and instead have replaced it with the actual cost of the vehicle of £13,500.
If that seems a little confusing, think of it like this:
They paid £10,000 for the vehicle from the bank, and have CR Bank and DR Vehicles at cost this amount. However, the true cost of the new vehicle is £13,500, made up of the already posted £10,000 and the part exchange allowance of £3,500, which has not yet been posted. You would post this amount by DR Vehicles at cost and CR Disposals of Fixed Assets.
What they have done in the answer booklet is to remove the DR entry of £10,000 and replaced it with the actual cost of £13,500, the other £3,500 being accounted for by the part exchange allowance. The journal for this would look something like this:
DR Bank aaaaaaaaaaaaaaaaaaaaa£10,000
CR Vehicles at Cost aaaaaaaaaaaaaaaaaaaa£10,000
Removal of original entry
DR Vehicles at Cost aaaaaaaaaaaa£13,500
CR Bank aaaaaaaaaaaaaaaaaaaaaaaaaaaaa£10,000
CR Disposal of fixed assets aaaaaaaaaaaaaa£3,500
Purchase of part-exchange vehicle
The two entries for the bank account cancel each other out, so there is no need to adjust the Bank account.
I hope this answers your query.0
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