1 Calculate the profit or loss on the disposal of the equipment. 2 Prepare the following note to the financial statements as at 28 February 2020: * Property, plant and equipment INFORMATION The following balances appeared in the general ledger of Umzinto Traders on 01 March 2019, the beginning of the financial year: Vehicles 300 000 Accumulated depreciation on vehicles 140 000 Equipment 130 000 Accumulated depreciation on equipment 75 000 Additional information 1) A new vehicle, cost price R160 000, was purchased on credit on 01 December 2019. 2) Equipment with a cost price of R10 000, was sold for cash on 31 August 2019 for R2 000. The accumulated depreciation on the equipment sold amounted to R7 000 on 01 March 2019. 3) Depreciation is calculated on equipment at 10% per annum on cost. 4) Depreciation is calculated on vehicles at 20% per annum on the diminishing balance.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
1 Calculate the profit or loss on the disposal of the equipment.
2 Prepare the following note to the financial statements as at 28 February 2020:
* Property, plant and equipment
INFORMATION
The following balances appeared in the general ledger of Umzinto Traders on 01 March 2019, the
beginning of the financial year:
Vehicles 300 000
Equipment 130 000
Accumulated depreciation on equipment 75 000
Additional information
1) A new vehicle, cost price R160 000, was purchased on credit on 01 December 2019.
2) Equipment with a cost price of R10 000, was sold for cash on 31 August 2019 for R2 000. The
accumulated depreciation on the equipment sold amounted to R7 000 on 01 March 2019.
3) Depreciation is calculated on equipment at 10% per annum on cost.
4) Depreciation is calculated on vehicles at 20% per annum on the diminishing balance.
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