5.8 The following is an extract from Barrow’s balance sheet at 31 August 2008:

Barrow’s depreciation policy is as follows:
1 a full year’s depreciation is charged in the year of acquisition, but none in the year of disposal;
2 no depreciation is charged on land;
3 buildings are depreciated at an annual rate of 2 per cent on cost;
4 plant is depreciated at an annual rate of 5 per cent on cost after allowing for an estimated residual value of £5000;
5 vehicles are depreciated on a reduced balance basis at an annual rate of 40 per cent on the reduced balance;
6 furniture is depreciated on a straight-line basis at an annual rate of 10 per cent on cost after allowing for an estimated residual value of £2000.
Additional information:
1 During the year to 31 August 2009, new furniture was purchased for the office. It cost £3000 and it is to be depreciated on the same basis as the old furniture. Its estimated residual value is £300.
2 There were no additions to, or disposals of, any other fixed assets during the year to 31 August 2009.
Required:

(a) Calculate the depreciation charge for each of the fixed asset groupings for the year to 31 August 2009; and

(b) show how the fixed assets would appear in Barrow’s balance sheet as at 31 August 2009.

Transcribed Image Text:

Fixed assets Cost Accumulated depreciation Net book value Land 200000 200000 Buildings 150000 60000 90000 Plant 55000 37 500 17500 Vehicles 45000 28800 16200 Furniture 20000 12600 7400 470000 138900 331 100