MCQ O-Level Principle of account for june 05

[dasani]

X's Financial year ends on 31 december . On 31 December 2003 the following accounts appeared in her ledger.

Equipment Debit side $18000
Provision for depreciarion of Equipment Credit side $ 7000

On 1 January 2004 she purchased equipment for $12000. Equipment is depreciated at 25% per annum using the straight line method. What wii be the total provision for depreciation of equipment on 31 December 2004.





How to do this.

A trader has a capital of $24400. His fixed asset are $16100 and his current liabilities are $4500. There are no long-term liabilities. What is the amount of his current asset?




Help.

 

[c0ol_fahad]

use balance sheet method FA+CA-CL = Capital ending
16100+CA-4500 = 24400
CA=24400-16100+4500
CA=12800
hope this helped u
fahad

 

[dasani]

thanks a lot

 

[hammadthepcgeek]

The paper is by-the-by now but anyways, the way to calculate your first Q would be:

18000(The existing equipment) *25%=4500
12000(The new machine bought at the start of the year 2004)*25%=3000

Add these two amounts and you would get the total depreciation charge for the year that is 7500.
Now you would add this into the existing provision balance of 7000 to make it 14500.

It would be recommended from my side to calculate the depreciation charge in two processes. First, for the old equipment and then the newly bought equipment.