- 16 Marks
FA – L1 – Q26 – Non-current assets and depreciation
Calculate the cost of machinery including delivery and modification costs, excluding warranty, for ledger entry.
Question
(1) A company purchased some heavy machinery. The invoice for the machinery showed the following items:
| Description | GH¢000 |
|---|---|
| Cost of machinery | 46,000 |
| Cost of delivery | 900 |
| Cost of 12-month warranty on the machinery | 1,600 |
| Total amount payable | 48,500 |
In addition, the company incurred GH¢3.4 million in making modifications to its factory so that the heavy machinery could be installed.
What should be the cost of the machinery in the company’s machinery account in the ledger?
(2)
A business acquired new premises at a cost of GH¢400 million on 1 January 20X9. In the period to the year end of 31 March 20X9 the following further costs were incurred:
| Description | GH¢000 |
|---|---|
| Costs of initial adaptation of the building | 12,000 |
| Legal costs relating to the purchase | 2,500 |
| Monthly cleaning contract | 3,400 |
| Cost of air conditioning unit necessary for machinery to be used | 2,800 |
| Cost of machinery | 12,300 |
What amount should appear as the cost of premises in the company’s statement of financial position at 31 March 20X9?
(3)
The plant and machinery account for a company for the year ended 30 June 20X9 is as follows:
| 20X8 | GH¢ | 20X9 | GH¢ | ||
|---|---|---|---|---|---|
| 1 July | Balance | 960,000 | 31 March | Transfer to disposal account | 80,000 |
| 31 Dec | Cash: purchase of machines | 200,000 | 30 June | Balance | 1,080,000 |
| 1,160,000 | 1,160,000 |
The company’s policy is to charge depreciation on plant and machinery at 25% each year on the straight-line basis, with proportionate charges in the year of acquisition and the year of disposal. None of the assets held at 1 July 20X8 was more than three years old.
What is the charge for depreciation of plant and machinery for the year ended 30 June 20X9?
(4)
A motor car was purchased in May 20X6 for GH¢7.8 million. The accounting policy is depreciation at 20% straight line on the cost of the assets in use at the year end. The car was traded in for a replacement vehicle purchased in July 20X9 with the agreed part exchange value being GH¢2.4 million. The company’s year-end is 31 December.
What was the profit or loss on disposal?
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