QUESTION 4 (CLO 4)

On January 1, 2000, Carola Limited bought a Motor Vehicle for $15,000,000. The company estimates that the Machinery will have a useful life of 6 years and will have a salvage value of $3,000,000. They decided to provide for depreciation using the Straight Line Method.

Prepare:

(a)The Journal entries recording the depreciation provisions up to December 31, 2002.

(6 marks)

(b)The Provision for Depreciation Account up to December 31, 2002 (8 marks)

(c)The Balance Sheet Extract for 2000 and 2001 (4 marks)

(d)State two (2) possible causes of depreciation.(2 marks)

[Total 20 marks]