QUESTION 3 (15 marks) Suppose that an asset had a cost of R15,000 and Accumulated Depreciation of R9,000, at the end of last year (2020). During the current year (2021) additions were made to the asset which enhanced its value by R600. The depreciation rate is 10%, calculated on a straight-line basis.

You are required to: 1. a) Calculate current depreciation, b) Book value and c) the profit/(loss) if the asset is sold for R6900.

2. Show how the above transaction will be disclosed in the Annual Financial Statements of the Municipality for the year ended 31 December 2021 ie:

I. Statement of Financial Performance (Income Statement) II. Statement of Financial Position (Balance Sheet) III. Statement of Cash Flow IV. Notes to the Annual Financial Statement

Clue: You need to show calculations and disclosure for the following items: 1. Depreciation 2. Gain / (Loss) on sale of asset 3. Cost 4. Accumulated Depreciation 5. Additions to fixed assets 6. Net Book Value 7. Acquisition of assets 8. Proceeds on sale of asset 9. Notes to the Financial Statements Accounting policy, Income statement and Balance sheet notes