FA – L1 – Q24 – Non-current assets and depreciation

Prepare vehicle, accumulated depreciation, and depreciation accounts for Ama's car leasing business for 20X6 to 20X9.

Question

Ama leases out German sports cars on a short-term basis. She started business on 1 January 20X6 and has decided to depreciate the cars on a straight line basis at 25% per annum on cost at the year-end. During the years 20X6 to 20X9 the following purchases took place:

Year	Purchase Details	Cost (GH¢000)
20X6	Acquired 20 Porsche 924 Turbos at a cost of GH¢18,600,000 each	372,000
20X7	Purchased 6 Porsches for a total cost of GH¢108,600,000	108,600
20X8	Purchased a further two cars costing GH¢19,800,000 each	39,600
20X9	Purchased 15 cars for GH¢21,000,000 each	315,000

Ama prepares accounts to 31 December each year.

Required
Prepare a vehicle account, an accumulated depreciation account, and a depreciation account for the years 20X6 to 20X9.

Answer

Vehicle a/c

Date	Details	GH¢000	Date	Details	GH¢000
20X6			20X6
	Cash	372,000		Balance c/d	372,000
20X7			20X7
	Balance b/d	372,000
	Cash	108,600		Balance c/d	480,600
		480,600			480,600
20X8			20X8
	Balance b/d	480,600		Balance c/d	520,200
	Cash	39,600
		520,200			520,200
20X9			20X9
	Balance b/d	520,200		Balance c/d	835,200
	Cash	315,000
		835,200			835,200
20X0
	Balance b/d	835,200

Accumulated depreciation a/c

Date	Details	GH¢000	Date	Details	GH¢000
20X6			20X6
	Balance c/d	93,000		Depreciation	93,000
20X7			20X7
	Balance c/d	213,150		Balance b/d	93,000
				Depreciation	120,150
		213,150			213,150
20X8			20X8
	Balance c/d	343,200		Balance b/d	213,150
				Depreciation	130,050
		343,200			343,200
20X9			20X9
	Balance c/d	552,000		Balance b/d	343,200
				Depreciation	208,800
		552,000			552,000

Depreciation a/c

Date	Details	GH¢000	Date	Details	GH¢000
20X6			20X6
	Accumulated depreciation	93,000		S of P or L	93,000
20X7			20X7
	Accumulated depreciation	120,150		S of P or L	120,150
20X8			20X8
	Accumulated depreciation	130,050		S of P or L	130,050
20X9			20X9
	Accumulated depreciation	208,800		S of P or L	208,800

WORKING: ANNUAL DEPRECIATION CHARGES

Year	Asset	Cost (GH¢000)	Calculation	20X6 (GH¢000)	20X7 (GH¢000)	20X8 (GH¢000)	20X9 (GH¢000)
20X6	Porsche 924	372,000	(372,000 × 25%)	93,000	93,000	93,000	93,000
20X7	Porsches	108,600	(108,600 × 25%)		27,150	27,150	27,150
20X8	Two Cars	39,600	(39,600 × 25%)			9,900	9,900
20X9	15 Cars	315,000	(315,000 × 25%)				78,750
	Total			93,000	120,150	130,050	208,800

Tags: Accumulated Depreciation, Asset management, Depreciation, Financial accounting, Ledger accounts, Non-current Assets, Straight-line Method, Vehicle account
Level: Level 1

Topic: Non-current assets and depreciation

Uploader: Samuel Duah