- 12 Marks
FA – L1 – Q20 – Non-current assets and depreciation
Record Sophia’s machine transactions for 20X6-20X8 and show financial position extracts.
Question
Since she commenced business on 1 January 20X6, Sophia has purchased for cash the following three machines.
| Machine | Date of purchase | Cost (GH₵) | Rate of depreciation |
|---|---|---|---|
| Machine 1 | 20 January 20X6 | 4,200 | 25% |
| Machine 2 | 17 April 20X7 | 5,000 | 30% |
| Machine 3 | 11 July 20X8 | 3,500 | 35% |
Sophia’s policy is to charge a full year’s depreciation in the year of purchase irrespective of the date of purchase. The reducing balance method is used to calculate depreciation. Accounts are prepared to 31 December each year.
Required
(a) Prepare the machinery account and accumulated depreciation account showing the charge to the depreciation account for each year.
(b) Show the relevant statement of financial position extracts for each year.
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