Non-current assets Cost Accumulated depreciation NBV K K K Equipment 60 000 24 000 36 000 Office Computers 8 000 5 600 2 400 Total 68 000 29 600 38 400 The following transactions took place during the year ended 31 December 2019: 1. On 31 May 2019, equipment purchased on 1 August 2016, at a cost of K28 000, was sold for K10 000. Payment was received by cheque. 2. On 1 June 2019, new equipment was purchased at a cost of K35 000. 3. On 20 June 2019, office computers were purchased for K600. BBD has the following depreciation policy: - Equipment is depreciated at the rate of 20% per annum using the straight-line method. - Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. - A full years depreciation is charged on equipment and office computers in the year of purchase. - No depreciation is charged on equipment in the year of sale. Required: (a) Explain the term depreciation. [2 Marks] (b) State four causes of depreciation. [4 Marks] (c) State the advantages of using the straight-line method of depreciation [4 Marks] (d) Prepare the following ledger accounts for the year ended 31 December 2019: (i) Provision for depreciation of equipment account [4 Marks] 3 (ii) Equipment disposal account [4 Marks] (e) Calculate the Net Book Value (NBV) of Equipment and Office Computers as at 31 December 2019. [6 Marks] [Total: 25 Marks] QUESTION TWO (a)Non-current assets Cost Accumulated depreciation NBV K K K Equipment 60 000 24 000 36 000 Office Computers 8 000 5 600 2 400 Total 68 000 29 600 38 400 The following transactions took place during the year ended 31 December 2019: 1. On 31 May 2019, equipment purchased on 1 August 2016, at a cost of K28 000, was sold for K10 000. Payment was received by cheque. 2. On 1 June 2019, new equipment was purchased at a cost of K35 000. 3. On 20 June 2019, office computers were purchased for K600. BBD has the following depreciation policy: - Equipment is depreciated at the rate of 20% per annum using the straight-line method. - Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. - A full years depreciation is charged on equipment and office computers in the year of purchase. - No depreciation is charged on equipment in the year of sale. Required: (a) Explain the term depreciation. [2 Marks] (b) State four causes of depreciation. [4 Marks] (c) State the advantages of using the straight-line method of depreciation [4 Marks] (d) Prepare the following ledger accounts for the year ended 31 December 2019: (i) Provision for depreciation of equipment account [4 Marks] 3 (ii) Equipment disposal account [4 Marks] (e) Calculate the Net Book Value (NBV) of Equipment and Office Computers as at 31 December 2019. [6 Marks] [Total: 25 Marks] QUESTION TWO (a)Non-current assets Cost Accumulated depreciation NBV K K K Equipment 60 000 24 000 36 000 Office Computers 8 000 5 600 2 400 Total 68 000 29 600 38 400 The following transactions took place during the year ended 31 December 2019: 1. On 31 May 2019, equipment purchased on 1 August 2016, at a cost of K28 000, was sold for K10 000. Payment was received by cheque. 2. On 1 June 2019, new equipment was purchased at a cost of K35 000. 3. On 20 June 2019, office computers were purchased for K600. BBD has the following depreciation policy: - Equipment is depreciated at the rate of 20% per annum using the straight-line method. - Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. - A full years depreciation is charged on equipment and office computers in the year of purchase. - No depreciation is charged on equipment in the year of sale. Required: (a) Explain the term depreciation. [2 Marks] (b) State four causes of depreciation. [4 Marks] (c) State the advantages of using the straight-line method of depreciation [4 Marks] (d) Prepare the following ledger accounts for the year ended 31 December 2019: (i) Provision for depreciation of equipment account [4 Marks] 3 (ii) Equipment disposal account [4 Marks] (e) Calculate the Net Book Value (NBV) of Equipment and Office Computers as at 31 December 2019. [6 Marks] [Total: 25 Marks] QUESTION TWO (a)Non-current assets Cost Accumulated depreciation NBV K K K Equipment 60 000 24 000 36 000 Office Computers 8 000 5 600 2 400 Total 68 000 29 600 38 400 The following transactions took place during the year ended 31 December 2019: 1. On 31 May 2019, equipment purchased on 1 August 2016, at a cost of K28 000, was sold for K10 000. Payment was received by cheque. 2. On 1 June 2019, new equipment was purchased at a cost of K35 000. 3. On 20 June 2019, office computers were purchased for K600. BBD has the following depreciation policy: - Equipment is depreciated at the rate of 20% per annum using the straight-line method. - Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. - A full years depreciation is charged on equipment and office computers in the year of purchase. - No depreciation is charged on equipment in the year of sale. Required: (a) Explain the term depreciation. [2 Marks] (b) State four causes of depreciation. [4 Marks] (c) State the advantages of using the straight-line method of depreciation [4 Marks] (d) Prepare the following ledger accounts for the year ended 31 December 2019: (i) Provision for depreciation of equipment account [4 Marks] 3 (ii) Equipment disposal account [4 Marks] (e) Calculate the Net Book Value (NBV) of Equipment and Office Computers as at 31 December 2019. [6 Marks] [Total: 25 Marks] QUESTION TWO (a)Non-current assets Cost Accumulated depreciation NBV K K K Equipment 60 000 24 000 36 000 Office Computers 8 000 5 600 2 400 Total 68 000 29 600 38 400 The following transactions took place during the year ended 31 December 2019: 1. On 31 May 2019, equipment purchased on 1 August 2016, at a cost of K28 000, was sold for K10 000. Payment was received by cheque. 2. On 1 June 2019, new equipment was purchased at a cost of K35 000. 3. On 20 June 2019, office computers were purchased for K600. BBD has the following depreciation policy: - Equipment is depreciated at the rate of 20% per annum using the straight-line method. - Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. - A full years depreciation is charged on equipment and office computers in the year of purchase. - No depreciation is charged on equipment in the year of sale. Required: (a) Explain the term depreciation. [2 Marks] (b) State four causes of depreciation. [4 Marks] (c) State the advantages of using the straight-line method of depreciation [4 Marks] (d) Prepare the following ledger accounts for the year ended 31 December 2019: (i) Provision for depreciation of equipment account [4 Marks] 3 (ii) Equipment disposal account [4 Marks] (e) Calculate the Net Book Value (NBV) of Equipment and Office Computers as at 31 December 2019. [6 Marks] [Total: 25 Marks]