SIMULATION PAPER DEPRECIATION HELP!!!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi <BR><BR>I am hoping someone will kindly offer me some help. I have recently started FTC Home study and i have made a start on a question on depreciation, here it is:<BR><BR> Basically i have to record the purchase of a transit van in the fixed asset register. it was bought for an original cost of £12,000 list price, vat is £2100.00. vehicle excise duty is £140.00 over all total of £14,240.00. It was then part exchanged for a discount of £2500.00 giving me with an end total of £11, 740.00. <BR><BR>Motor vehicles are depreciated at 33% per year on cost (straight line basis)<BR><BR> Residual value is 0, and a full years depreciation is charged in the year of an assets acquisition.<BR><BR>i need to record the acquisitions and the disposal in the fixed asset register and prepare journals to record the invoices in the main ledger.<BR><BR>I cant seem to get my head around this, can any one help me please?<BR><BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    SIMULATION PAPER DEPRECIATION HELP!!!

    Hi Tracey<BR><BR>Hope this helps.<BR><BR>To record the purchase of the vehicle, the following journal should do it.<BR><BR>Dr Fixed Assets (Van) 12,000<BR>Dr VAT Account 2,100<BR>Dr Motor Vehicle Expense 140<BR>Cr Bank or Creditors 14,240<BR><BR>Depending on how many years the vehicle was held for then do your depreciation charge (for each relevant year)<BR><BR>Dr Depreciation expense (P&L) 3,960<BR>Cr Accumulated Depc'n (B/S) 3,960<BR><BR>Then for the disposal account<BR><BR>First transfer the asset to Dr Disposal, Cr Fixed Asset.<BR>Then transfer the depreciation Dr Accum Depc'n Cr Disposal<BR>Then the part exchange Dr Fixed Assets Cr Disposal<BR>(Debit the Fixed Assets here because the part exchange represents a reduction in the value of the new van).<BR>Then the balance you are left with in your disposals account goes to your P&L as either a loss or a gain on disposal.<BR><BR>You then take the new asset and begin again following the steps above.<BR><BR>Hope this helps, but if you need anything else, please let me know.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    SIMULATION PAPER DEPRECIATION HELP!!!

    Hi.<BR><BR>If it's a third on straight line basis, wouldn't the depreciation be £4,000?<BR><BR>Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    SIMULATION PAPER DEPRECIATION HELP!!!

    Many thanks for your much appreciated! I will have another go, and see how i do. Thanks for taking the time to reply!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    SIMULATION PAPER DEPRECIATION HELP!!!

    sorry meant to say many thanks for your help! hehe

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