Accounting Test Question DEP No 1:

Question:

Johnson & Co, a building and construction firm, commenced trading on 1 January Year 6. During the three years to 31 December Year 8, the company bought and sold motor vehicles for use in the business as follows:

The firm provides for depreciation of its motor vehicles at the rate of 20% per annum of the straight line basis, with no residual value.

A full year’s depreciation is provided for motor vehicles bought before 1 July but no depreciation is provided in the year of disposal.

Required:

(1) Prepared in the books of Johnson & Co for the period 1 January Year 6 to 31 December Year 8, balancing the accounts each year, the following:

(a) Using the straight line basis for depreciation:

(i) Motor Vehicles Account

(ii) Provision for Depreciation Account

(iii)Motor Vehicles Disposal Account

(15 marks)

(b)  Using the reducing balance basis for depreciation at the rate of 25% per annum:

(i) Provision for Depreciation Account

(ii) Motor Vehicles Disposal Account

(10 marks)