Reference no: EM132166942
FINANCIAL ACCOUNTING ASSIGNMENT -
a) Briefly explain the nature and purpose of accounting for depreciation.
The chief accountant of Jitegemea Ltd has encountered difficulties while accounting for fixed assets and the related depreciation in the company's draft accounts for the year ended 30 April 2000. He has decided to seek your professional advice and presented the following balances of fixed assets as at 1 May 1999:
|
|
Acquisition Cost
|
Accumulated Depreciation
|
Depreciation Rates
|
|
|
£
|
£
|
%
|
|
Furniture
|
900,000
|
300,000
|
12.5
|
|
Trucks
|
3,525,000
|
1,470,000
|
25
|
|
Plant and machinery
|
7,387,500
|
4,462,500
|
10
|
|
Land
|
2,775,000
|
-
|
Nil
|
|
Building
|
2,925,000
|
292,500
|
2.5
|
The following additional information was also available:
1. It is the company's policy to write off cost of the assets using above percentages on cost.
2. Depreciation is fully charged in the year of acquisition and none in the year of disposal.
3. A three year old machine acquired for £187,500 was sold for £15,750.
4. It has been decided to adjust and charge depreciation on buildings at 4%.
5. A used delivery truck purchased three years ago for £248,250 was traded in during the year at a value of £157,500 in part exchange of the new delivery truck costing sh.450,000.
6. Land, buildings and machinery were acquired for £1,350,000 from a company that went out of business. At the time of acquisition £90,000 was paid to have the assets revalued by a professionally qualified valuer. The revaluation indicated the following market values.
|
|
Sh.
|
|
Land
|
900,00
|
|
Building
|
600,000
|
|
Machinery
|
300,000
|
Required: A schedule of movement of fixed assets as requested by the Chief Accountant for inclusion in the company's accounts for the year ended 30 April 2000.