Reference no: EM132577764
A transport company started business on 1 January 2015 and purchased Truck (A) for $8 million. Truck (A) was destroyed in a road accident on March 31, 2016 and the insurance company paid out $ 6 million to the transport company.
On 1 April 2016, Truck (B) was purchased for $ 9 million
On 1 July 2016, Car (C) was purchased for $. 2 million
On 1 July 2017, Car (C) was traded in for Car (D) which cost $. 2.5 million less a part exchange allowance on car (C) of $. 1.5 million. The depreciation policy of the company is:
- Depreciate trucks at 20% each year on the reducing balance basis.
- Depreciate cars at 25% each year using a straight line basis.
- Assume a residual scrap value for cars of 10% of the original cost.
- If a vehicle is owned for a part a year, calculate depreciation according to the number of months for which the vehicle is owned.
The financial year of the company ends on 31st December.
Required:
Question 1: Write up the following ledger accounts as on 31/12/2017.
(i) Motor vehicle at cost account
(ii) Provision for depreciation on motor vehicles account.
(iii) Disposal of motor vehicles account