FA – L1 – Q19 – Non-current assets and depreciation

Record Martin’s machine transactions for 20X8-20X9 and show financial position extracts.

Question

Martin bought a machine for GH₵10,000 on 1 January 20X8. He estimates a useful life of 8 years and a residual value of GH₵800. Depreciation is to be calculated on a straight-line basis.

Required:
(a) Write up for 20X8 and 20X9 the
(i) Machinery account (3 marks)
(ii) Accumulated depreciation account (3 marks)
(iii) Depreciation expense account (2 marks).
(b) Show how the machine would be presented in the statement of financial positions as at 31 December 20X8 and 31 December 20X9. (2 marks)

Answer

(a)
(i) Machinery account

Date	Details	GH₵	Date	Details	GH₵
1 Jan 20X8	Bank	10,000	31 Dec 20X8	Balance c/d	10,000
1 Jan 20X9	Balance b/d	10,000	31 Dec 20X9	Balance c/d	10,000

(ii) Accumulated depreciation account

Date	Details	GH₵	Date	Details	GH₵
31 Dec 20X8	Balance c/d	1,150	31 Dec 20X8	Depreciation expense	1,150
31 Dec 20X9	Balance c/d	2,300	1 Jan 20X9	Balance b/d	1,150
			31 Dec 20X9	Depreciation expense	1,150

(iii) Depreciation expense account

Date	Details	GH₵	Date	Details	GH₵
31 Dec 20X8	Accumulated depreciation	1,150	31 Dec 20X8	Profit or loss	1,150
31 Dec 20X9	Accumulated depreciation	1,150	31 Dec 20X9	Profit or loss	1,150

Workings:
Depreciable amount = GH₵10,000 – GH₵800 = GH₵9,200
Annual depreciation = GH₵9,200 ÷ 8 years = GH₵1,150

(b) Statement of financial position at 31 December (extract)
Tangible non-current assets

	20X8	20X9
Machinery at cost	GH₵10,000	GH₵10,000
Accumulated depreciation	(GH₵1,150)	(GH₵2,300)
Carrying amount	GH₵8,850	GH₵7,700

Tags: Accumulated Depreciation, Depreciation, Financial Position, Machinery Account, Non-current Assets, Straight-line Method
Level: Level 1

Topic: Non-current assets and depreciation

Uploader: Samuel Duah