Calculate the income statement balances for depreciation

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Reference no: EM132840637

Question - Shauna owns a transport and warehousing business which has a financial year end of 30 June 2020. The trial balance of the business includes the following items. All balances are as at 1 July 2019, other than the Receivables balance, which is at 30 June 2020:

Dr Cr £ £ Buildings 560,000 Accumulated depreciation: buildings 112,400 Plant and equipment 300,000 Accumulated depreciation: plant and equipment 140,000 Lorries 470,000 Accumulated depreciation: lorries 188,000 Receivables 930,000 Allowance for irrecoverable receivables 25,50

The business has the following accounting policies for depreciation: (i) Depreciation

Buildings 2% per annum straight-line basis

Plant and equipment 10% per annum straight-line basis

Lorries 20% reducing balance basis (ii) Allowance for irrecoverable receivables is 3% Notes: Depreciation is calculated on a monthly basis. Shauna purchased a warehouse on 1 July 2019 for £220,000. The seller accepts a warehouse on the same trading account in part exchange, at a trade-in-value of £50,000. That warehouse disposed of had a cost of £120,000 and accumulated depreciation book value of £56,000. Plant and equipment costing £70,000 is sold on 1 February 2020 for £24,000. Accumulated depreciation at 1 July 2019 is £42,000. Shauna learns that Bakkie Ltd has gone into liquidation and therefore the business will not receive the amount from them of £6,300, which it is owed.

(a) Calculate the income statement balances for depreciation, profit or loss on disposal of non-current assets and the allowance for irrecoverable receivables. Show all of your workings.

(b) Prepare the non-current asset note. Your note should include the cost, as adjusted for additions and disposals.

Reference no: EM132840637

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