{a) Identify the four factors which cause fixed assets to depreciate.

{b) Which one of these factors is the most important for each of the following assets?

(i) a gold mine,

(ii) a motor lorry,

(hi) a 50 year lease on a building,

(iv) land,

(v) a ship used to ferry passengers and vehicles across a river following the building of a bridge across the river,

(vi) a franchise to market a new computer software package in a certain country.

(c) The financial year of Ochre Ltd will end on 31 December 19X6. At 1 January 19X6 the company had in use equipment with a total accumulated cost of £135,620 which had been depreciated by a total of £81,374. During the year ended 31 December 19X6 Ochre Ltd purchased new equipment costing £47,800 and sold off equipment which had originally cost £36,000 and which had been depreciated by £28,224 for £5,700. No further purchases or sales of equipment are planned for December. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year’s depreciation is provided for on all equipment in use by the company at the end of each year.

Required:

Show the following ledger accounts for the year ended 31 December 19X6:

(i) the Equipment Account.

(ii) the Provision for Depreciation on Equipment Account.

(iii) the Assets Disposals Account.

[Association of Accounting Technicians)