Chibuzo’s financial year ends on 31 December. He depreciates his motor vehicles at 20% per annum on the cost of motor vehicles held at the end of each financial year.
Chibuzo provided the following information:
1 January 20–7 Purchased motor vehicle A for $15,000 and motor vehicle B for $1,8000
1 July 20–9 Motor vehicle A was sold for $8,600. On the same date motor vehicle C was purchased for $21,000
a. Calculate the profit or loss on disposal of motor vehicle A.
b. Calculate the depreciation charge for motor vehicles for the year ended 31 December 20–9.
Chibuzo provided the following additional information for the year ended 31 December 20–9:
$
Revenue ……………………………………………….. 108,200
Wages ……………………………………………….. 10,300
Rent and rates ……………………………………………….. 2,100
Purchases ……………………………………………….. 81,140
Inventory 1 January 20–9 …………………………….. 5,410
Administration and selling expenses …………. 2,230
Commission receivable ……………………………… 2,050
Provision for doubtful debts 1 January 20–9 ……. 540
Additional information:
1. On 31 December 20–9
Inventory ……………………………………………….. 5,550
Wages accrued ……………………………………………….. 120
Rates prepaid ……………………………………………….. 300
Commission receivable outstanding ………….. 420
Provision for doubtful debts to be reduced to ……. 450
2. Office equipment was valued at $4,320 on 1 January 20–9. Office equipment, $1,200, was purchased during the year. No office equipment was disposed of during the year. On 31 December 20–9 the office equipment was valued at $5,250.
c. Prepare the income statement for the year ended 31 December 20–9.
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