Mavron Plc owned the following motor vehicles as at 1 April 2015:

Motor Vehicle Date acquired Cost Estimated residual value Estimated Life

AAT 101 1 October 2012 15,500 4,500 5yrs

DJH 202 1 April 2013 20,000 2,000 9yrs

Mavron Plcs policy is to provide at the end of each financial year, depreciation using the straight line method applied on a month-by-month basis on all motor vehicles used during the year.

During the financial year ended 31 March 2016 the following occurred:

On 30 June 2015 AAT 101 was traded in and replaced by KGC 303. The trade-in allowance was 5000. KGC 303 cost 15,000 and the balance due (after deducting the trade-in allowance) was paid partly by a loan of 6,000 from Pinot Finance. KGC 303 is expected to have a residual value of 4,000 after an estimated economic life of 5years.

The estimated remaining economic life of DJH 202 was reduced from 6 years to 4 years with no change in the estimated residual value.

Required:

i. Reconstruct the Motor Vehicles Account and the Provision for Depreciation Account for the year ended 31st March 2016.

ii. Show the necessary calculations necessary.

a)What is Depreciation?

b)List and explain (3) three methods of Depreciation