Question

On 1 January 2014 Alex had a motor vehicle with an original cost of $17000 on which depreciation of $6800 had been provided.

On 1 April 2014 he bought a new vehicle, costing $24 000. He sold the old one and received a cheque for $9400.

Alex provides depreciation on motor vehicles at the rate of 40% per annum on the reducing (diminishing) balance basis. He allows a full year’s depreciation in the year of purchase and none in the year of disposal.

Required

Prepare the accumulated depreciation account and motor vehicle disposal account for the year ended 31 December 2014. Balance the account(s) where necessary and bring down the balance(s) on 1 January 2015.

Answer 1

Depreciation: 24,000 x 40% x 9/12 (From April to December) =7,200

pls see attached image