Question
Mr Chibanda owns a Construction company based in Kasama. His Assets Register had the following details for his assets. Date of Acquisition Asset Details Cost
Mr Chibanda owns a Construction company based in Kasama. His Assets Register had the following details for his assets.
Date of Acquisition | Asset Details | Cost (K) | Dep. Rate (%) | Accumulated Dep | Dep. Charge |
31-Mar-18 | Saloon Car | 280,000.00 | 20.00 | 168,000.00 | 56,000.00 |
31-Mar-18 | Soil Tester | 160,000.00 | 25.00 | 120,000.00 | 40,000.00 |
01-Apr-18 | Truck 8 Ton | 780,000.00 | 25.00 | 390,000.00 | 195,000.00 |
01-Apr-18 | Utility Van | 450,000.00 | 25.00 | 225,000.00 | 112,500.00 |
28-Apr-18 | Office Building | 1,200,000.00 | 2.00 | 48,000.00 | 24,000.00 |
31-Mar-19 | Industrial building | 3,400,000.00 | 5.00 | 340,000.00 | 170,000.00 |
31-Mar-19 | Tipper Truck | 890,000.00 | 25.00 | 445,000.00 | 222,500.00 |
31-Mar-19 | Compactor | 1,700,000.00 | 25.00 | 850,000.00 | 425,000.00 |
8,860,000.00 | 2,586,000.00 | 1,245,000.00 |
NOTES
- The Saloon Car purchased on 31 March 2018 for K280,000 was sold on 31 March 2020 for K160,000
- The Utility Van bought on 1 April 2018 was involved in an accident and it was beyond economic recovery. Since it was comprehensively insured, the Insurer paid K324,000 after deducting 10% excess.
Required:
- Explain the terms Balancing Allowance and Balancing Charge
- In both instances, calculate if there was any Balancing Allowance or Balancing Charge
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