Profit or loss on disposal of the plant

Reference no: EM133132453

Accounting Fundamentals

Assignment questions:

Question 1

At the beginning of the financial year 1 April 2020, a company had a balance on plant account of $372 000 and on provision for depreciation of plant account of $205 400.

The company's policy is to provide for depreciation using the reducing balance method applied to the non-current assets held at the end of the financial year at the rate of 20% per annum.

On 1 September 2020, the company sold for $13 700 some plant which it had acquired on 31 October 2016 at a cost of $36 000. Additionally, installation costs totalled $4000. During 2018 major repairs costing $6 300 had been carried out on this plant and in order to increase the capacity of the plant, a new motor had been fitted in December 2018 at a cost of $4 400. A further overhaul costing $2 700 had been carried out during 2019.

The company acquired new replacement plant on 30 November 2020 at a cost $96 000, inclusive of installation charges of $7 000.

REQUIRED:

a. Plant Account for the year ended 31 March 2021
b. Provision for depreciation for the year ended 31 March 2021
c. Profit or loss on disposal of the plant
d. Explain why the reducing balance might be more suitable for assets like motor vehicles.

Question 2

The accounts of a business should reflect a true and fair view of its financial position. To achieve this, accountants apply a series of accounting concepts. There are four fundamental accounting concepts namely going concern, prudence, matching/accruals and consistency concepts.

REQUIRED:

Discuss these four concepts by providing examples. Your answer should not exceed 300 words.

Reference no: EM133132453

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