Question
In what ways can non-current assets be disposed? What do you understand by the trade in disposal? Trust in him Enterprise has the following tasks
- In what ways can non-current assets be disposed?
- What do you understand by the trade in disposal?
- Trust in him Enterprise has the following tasks at 1st April, 2017.
NO. | TRUCK NUMBER | DATE ACQUIRED | COST OF VEHICLE GH
| ESTIMATE RESIDUAL VALUE GH | ESTIMATED USEFUL LIFE |
1 | GT 124516 | 1st October, 2016 | 42,500.00 | 12,500.00 | Five (5) years |
NO. | TRUCK NUMBER | DATE ACQUIRED | COST OF VEHICLE GH
| ESTIMATE RESIDUAL VALUE GH | ESTIMATED USEFUL LIFE |
2. | GT 346717 | 1st April, 2017 | 60,000.00 | 10,000.00 | Eight (8) years |
Note: Estimated Residual value (ERV)
The company policy is to provide at the end of each financial year a change for depreciation using the straight line method, applied on month by month basis.
During the financial year ended 31st March, 2017, the following occurred:
- On 30th June, vehicle No. GT 124516 was traded in and replaced by GE 147817 the trade in allowance was GH 25,000.00.
GE 147817 Cost GH75,000.00 and the balance due that is after deducting the trade in allowance was paid partly in cash and partly by a loan of GH30,000.00 from Port Base Financial Service.
The GE 147817 estimate to have a residual value of GH20,000.00 after an estimated economic life for five (5) years.
The estimated remaining economic life of vehicle No.2 GT 346717 was reduced from six (6) years to four (4) years with no change with the estimated residual value.
You are require to:
- Show the journal entries to record the above transaction which occurred during the financial year ended 31st March, 2018
- Journal entry to record the depreciation of trucks for the year ended 31st March, 2018.
- Trucks account and provision for the depreciation account for the year ended 31st March, 2018.
- Show the necessary calculation clearly in the books
- Post the items in their relevant ledgers.
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