First, calculate depreciations.

For Machinery: Opening cost: 750,000 Purchases: July 1 – 75,000 (owned 6/12 months) Dec 1 – 27,600 (owned 1/12 months)

Total cost at year-end: 750,000 + 75,000 + 27,600 = 852,600

Depreciation: The note says all machinery purchased within previous four years, so opening is depreciated full year at 20%.

Opening NBV implied, but for dep: dep on opening cost 750,000 * 20% = 150,000

On July purchase: 75,000 * 20% * (6/12) = 7,500

On Dec purchase: 27,600 * 20% * (1/12) = 460

Total dep for year: 150,000 + 7,500 + 460 = 157,960

Accum dep opening: 301,000 + 157,960 = 458,960 c/d

For Motor Vehicles: Opening cost: 1,000,500 Disposal: 40,000 cost, so remaining cost: 1,000,500 – 40,000 = 960,500

Dep on disposed: Since sold June 30, dep for half year: 40,000 * 25% * (6/12) = 5,000 (but NBV given as 16,000, let’s check consistency.

Original cost 40,000, dep rate 25% straight line, no residual.

NBV at sale 16,000, so accumulated dep at sale: 40,000 – 16,000 = 24,000

For the year, dep up to sale: half year 40,000*25%*0.5 = 5,000, so prior accum dep was 19,000? But the note says all purchased within previous three years, but we don’t need to back calculate.

For remaining: dep for full year on 960,500 * 25% = 240,125

For disposed: dep for 6 months 5,000

Total dep for year: 240,125 + 5,000 = 245,125

Accum dep opening 402,000 + 245,125 – accum dep on disposed 24,000 (transferred to disposal) = 402,000 + 245,125 – 24,000 = 623,125 c/d

Opening accum dep includes the 24,000 for the disposed.

When disposing, transfer accum dep to disposal account.

Sale: proceeds = NBV + profit = 16,000 + 600 = 16,600

Now, ledger accounts:

a) Machinery

Debit: Balance b/d 750,000 Bank 75,000 Creditor (BD Machinery) 27,600

Total 852,600 Balance c/d 852,600

b) Accumulated Depreciation of Machinery

Credit: Balance b/d 301,000 Dep expense 157,960

Total 458,960 Balance c/d 458,960

c) Motor Vehicles

Debit: Balance b/d 1,000,500

Credit: Disposal 40,000 Balance c/d 960,500

Total 1,000,500

d) Accumulated Depreciation of Motor Vehicles

Credit: Balance b/d 402,000 Dep expense 245,125

Debit: Disposal 24,000 (since cost 40,000 – NBV 16,000 = dep 24,000 at sale, but dep for year on it is added first)

Procedure: Dep is charged for the year, including on disposed asset up to disposal.

So accum dep:

Opening 402,000

Add dep for year 245,125

Then transfer to disposal the accum dep up to disposal date for the asset.

The accum dep on disposed is opening dep on it + dep this year on it.

We don’t have individual dep, but since NBV at sale is given as 16,000, and sale on June 30, the dep up to sale is included in the NBV.

To calculate: The dep for the disposed asset this year is 40,000 * 25% * 6/12 = 5,000

So accum dep at disposal = cost – NBV = 40,000 – 16,000 = 24,000, which includes the 5,000 for this year.

So total dep expense is dep on remaining full year + dep on disposed half year = 960,500 * 25% + 5,000 = 240,125 + 5,000 = 245,125

Then transfer to disposal 24,000

So accum dep account:

Debit: Disposal 24,000

Credit: Balance b/d 402,000

Dep expense 245,125

Balance c/d = 402,000 + 245,125 – 24,000 = 623,125

Yes.

e) Disposal of Motor Vehicles

Debit: Motor Vehicles (cost) 40,000 Profit (to P&L) 600

Credit: Accum Dep 24,000 Bank (proceeds) 16,600

Total debit 40,600, credit 40,600

Wait, no: Standard disposal account:

Debit: Cost 40,000

Credit: Accum Dep 24,000

Credit: Proceeds 16,600

Debit: Profit 600 (to balance, but usually credit profit if gain.

If profit on disposal, the account is credited with profit.

Standard:

Disposal account:

Debit: Asset cost

Credit: Accum dep

Credit: Proceeds

If credit > debit, debit disposal with profit to P&L.

No:

Typical:

Disposal Dr with cost

Disposal Cr with accum dep

Disposal Cr with proceeds

If proceeds + accum dep > cost, then Cr disposal with profit, Dr P&L.

To close, transfer the balance to P&L.

Since profit 600, meaning proceeds 16,600 > NBV 16,000.

So Disposal:

Dr: Cost 40,000

Cr: Accum Dep 24,000

Cr: Bank 16,600

Balance: 40,000 – 24,000 – 16,600 = -600, so Cr balance 600, which is profit, transferred to P&L Dr Disposal Cr P&L.

But in ledger, show as:

Disposal Account

Cost 40,000 | Accum Dep 24,000

| Bank 16,600

| Profit 600

40,000 | 41,200

Wait, no, to balance, it’s the opposite.

Standard format in T-account:

Left (Dr): Cost 40,000

Right (Cr): Accum Dep 24,000

Right (Cr): Proceeds 16,600

Then to balance, since Cr total 40,600 > Dr 40,000, Dr the account with profit 600 on left, but no.

The profit is the difference, but in practice, the disposal account is temporary.

The account is:

Dr Disposal with cost

Cr Disposal with accum dep

Cr Disposal with proceeds

Then the balance is cost – dep – proceeds = 40,000 – 24,000 – 16,600 = -600, meaning credit balance, which is profit, so to close, Dr Disposal 600 Cr P&L 600? No.

If balance is credit, it means gain, so Dr P&L Cr Disposal? No.

Recall: Profit on disposal is credit to P&L.

So to close the disposal account with credit balance (excess credit), we Dr Disposal, Cr P&L.

Yes, so in account:

Dr: Cost 40,000

Cr: Accum Dep 24,000

Cr: Proceeds 16,600

Cr: P&L (profit) 600

Then Dr total 40,000, Cr total 41,200? No.

No:

The balance is the difference.

The entry for profit is Dr P&L Cr Disposal if profit? No.

Let’s think journal:

When disposal:

Dr Disposal Cr Asset cost (transfer cost)

Dr Accum Dep Cr Disposal (transfer dep)

Dr Bank Cr Disposal (proceeds)

Then the balance on Disposal is Dr if loss, Cr if profit.

If Cr balance (profit), then Dr Disposal Cr P&L to close.

So in T-account:

Left (Dr): Asset cost 40,000

Right (Cr): Accum Dep 24,000

Right (Cr): Proceeds 16,600

Right (Cr): P&L 600 (to close? No.

To show the account, the closing entry is left (Dr): P&L loss or right (Cr): P&L profit.

For profit, since balance is Cr 600, to close, Dr Disposal 600 right? No.

T-account convention for disposal:

Usually shown as:

Disposal Account

Bank (proceeds) | Asset cost

Accum Dep | P&L (profit) if profit

No, better to use code_execution for accuracy.

Since simple, let’s present the accounts as T-accounts.

a) Machinery

Balance b/d 852,600 (next year)

b) Accumulated Depreciation – Machinery

Balance b/d 458,960

c) Motor Vehicles

Balance b/d 960,500

d) Accumulated Depreciation – Motor Vehicles

Balance b/d 623,125

e) Disposal of Motor Vehicles

(Note: In some formats, the profit is shown on the credit side, but to balance, since Dr 40,000, Cr 40,600, add Dr 600 to P&L, but since profit, it’s P&L Dr, Disposal Cr for the entry, but in account, it’s shown as Cr P&L profit.

Standard T-account for disposal:

Dr side: Asset cost 40,000

Dr side: P&L profit 600

Cr side: Accum dep 24,000

Cr side: Bank 16,600

Yes, that balances 40,600 = 40,600

Yes, that’s the convention for profit.

If loss, Cr side P&L loss.

Yes.

In Ghanaian banking, such ledger entries ensure compliance with IAS 16 for property, plant, and equipment, helping in accurate asset valuation for loan collateral assessments.