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SAMBOS Ltd. (SAMBOS) supplies all kinds of lunchtime foods to businesses, garages and shops. As a result they own a number of delivery Vans. These
SAMBOS Ltd. (SAMBOS) supplies all kinds of lunchtime foods to businesses, garages and shops. As a result they own a number of delivery Vans. These Vans are depreciated at 20% on cost, with depreciation charged on a proportionate basis on additions and disposals made during the year. At 31 December 2017, it had the following Delivery Vans: VAN DATE OF PURCHASE COST 01-Jan-15 81,720 01-Apr-16 92,770 01-Aug-17 60,000 100,000 01-Mar-18 On 1 January 2018 SAMBOS disposed of Van 1 for 10,000. At 31 December 2018, in light of the small proceeds on disposal and the increased mileage covered by the Vans. It was decided to decrease the useful economic lives of the trucks from five to four years for the year ended 31 December 2018 and thereafter. Delivery Vans are to continue to be depreciated on a straight line basis. (a) Calculate the depreciation to be charged to the Statement of Profit or Loss for the year ended 31 December 2018. (b) Prepare the journal entries to account for the Vans and depreciation for the year ended 31 December 2018. (c) Give a reason for your treatment of the change in useful economic life from five years to four years. (15 Marks) 123 + 4
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