CHAP 1 : ACCOUNTING FOR NON-CURRENT ASSET
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Transcript of CHAP 1 : ACCOUNTING FOR NON-CURRENT ASSET
CHAP 1 : ACCOUNTING FOR NON-CURRENT ASSET
SPESIFIC OUTCOME :
1. Understand non-current asset2. Understand the concept of depreciation3. Understand methods of depreciation4. Prepare the accounting record for non-
current asset
ACCOUNTING FOR NON-CURRENT ASSET
Asset
Non Current Asset/Fixed Asset
Tangible Asset/PPE
Example ?
Intangible Asset
Example?
Current Asset
Example ?
Determining & Recording Non Current Asset Cost
Based on MFRS 116 – refer pg 3
Depreciation
Depreciation vs amortization vs Depletion
Methods of Depreciation
Straight Line/Reducing Balance /Sum of Years Digit/ Units of Production Method
DISPOSAL OF ASSET
EXAMPLE 1.6 ( pg 14 ):
An equipment bought on 1 Jan 2003 RM40,000, depreciated 10% straight line method was SOLD at RM16,000 on 31 Dec 2008. AD is RM 24,000.
Journal entry :
31/12/08 Dr Cash RM16,000 Accu. Depre RM 24,000
Cr Equipment RM 40,000
EXAMPLE 1.7 ( pg 14 ):
An equipment bought on 1 Jan 2003 RM40,000, depreciated 10% straight line method was SOLD at RM20,000 on 31 Dec 2008. AD is RM 24,000.
Journal entry :
31/12/08 Dr Cash RM20,000 Accu. Depre RM 24,000
Cr Equipment RM 40,000 P&L ( gain from
disposal)RM4,000
Depreciation Convention
Refer your text book Eg 1.9 pg 15
Example 1.12 pg 22 :
Mermaid Ltd bought a TRAILER on 30/4/2006 RM 130,000 in cash. The trailer than was exchanged with a LORRY valued at RM 88,000On 1/7/2008. The exchanged value is RM 74,500 and the remainingbalance paid by cheque. The company policy is to depreciate vehicle with STRIGHT LINE METHOD AT 18% PER YEAR.The financial year of the company is at 31 Dec every year.
Calculate the depreciation and prepare ledger entries at at 31 Dec 2008 for the following situation :
a. Term Basisb. Monthly Basisc. FDP, NDDd. NDP, FDD
TERM BASIS & MONTHLY BASIS
FY
TRAILER LORRY DEPRE.30/4/2006 RM130,000
1/7/2008 RM88,000
200618% X 130,000 X 8/12 15,600 15,600
2007 18% X 130,000 23,400 23,400
200818% X 130,000 X 6/12 11,700
18% X 88,000 X
6/12 7920 19,620
ACCU.DEPRE 50,700
VEHICLE A/C2008 2008 1-Jan Bal b/f 1300001-Jul Disposal 1300001-Jul Disposal (lorry) 7450031-Dec Bal cf 88000 Bank 13500 218000 218000
ACCUMULATED DEPRECIATION1-Jul Disposal 50,700 1-JanBal bf 39,000
31-DecBal cf 7,920 Depre (current yr) 19,620
58,620 58,620
DISPOSAL A/C
1-JulVehicle 130000 1-JulVehicle 74500 Accu Depre 50,700
P&L ( loss from disposal) 4,800
130000 130000
c. FDP, NDDd. NDP, FDD
Refer the summary in your text book.
Example 1.12 pg 22 : ( SAME EXAMPLE, DIFFERENT METHOD )
Mermaid Ltd bought a TRAILER 30/4/2006 RM 130,000 in cash. The trailer than was exchanged with a LORRY valued at RM 88,000On 1/7/2008. The exchanged value is RM 74,500 and the remainingBalance paid by cheque. The company policy is to depreciate vehicle with REDUCING BALANCE METHOD AT 18% PER YEAR.The financial year of the company is at 31 Dec every year.
Calculate the depreciation and prepare ledger entries at at 31 Dec 2008 for the following situation :
a. Term Basisb. Monthly Basisc. FDP, NDDd. NDP, FDD
TERM BASIS & MONTHLY BASIS – REDUCING BALANCE METHOD
FY
TRAILER LORRY DEPRE.30/4/2006 RM130,000
1/7/2008 RM88,000
200618% X 130,000 X 8/12 15,600 15,600
NBV 114,400
2007 18% X 114,400 20,592 20,592 NBV 93,808
200818% X 93,808 X 6/12 8,443
18% X 88,000 X
6/12 7920 16,363
ACCU.DEPRE 44,635
VEHICLE A/C2008 2008 1-Jan Bal b/f 1300001-Jul Disposal 1300001-Jul Disposal (lorry) 7450031-Dec Bal cf 88000 Bank 13500 218000 218000
ACCUMULATED DEPRECIATION1-Jul Disposal 44,635 1-JanBal bf 36,192
31-DecBal cf 7,920 Depre (current yr) 16,363
52,555 52,555
DISPOSAL A/C
1-JulVehicle 130000 1-JulVehicle 74500 Accu Depre 44,635
P&L ( loss from disposal) 10,865
130000 130000
Extract of P&LDepre 16,363Loss from disposal 10,865
Extract of Balance Sheet
Non Current Asset :
Vehicle 88,000(-) Accu Depre (7,920)
80,080
Example 1.13 pg 26 :
The following is the information on the equipment owned by Company ABC on 31 deC 2007 :
Equipment RM 100,000Accu deprec ( 30,000 )
70,000
On 31 March 2008, an equipment bought on 1April 2006 RM 30,000Is exchanged with a new equipment valued at RM 26,000. TheExchange value is RM 18,000. Depreciation for the equipmentIs 15% per year ( STRAIGHT LINE METHOD ).
Prepare the relevant ledger on 31 Dec 2008 :
SOLUTION :
FY
OLD EQUIPMENT NEW EQUIP
BALANCE OF EQUIP DEPRE.
1/4/2006 RM30,000
31/3/2008 RM26,000
RM100k-disposed RM30k
RM
70,000
0615% X 30,000 X 9/12 3,375 3,375
07 15% X 30,000 4,500 4,500
0815% X 30,000 X 3/12 1,125
15% X 26,000 X
9/12 2,92515% X 70,000 10,500 14,550
ACCU.DEPRE 9,000
EQUIPMENT A/C2008 2008 1-Jan Bal b/f 100,00031/3 Disposal 30,00031/3 Disposal 18,00031-Dec Bal cf 96,000 cASH 8,000 126,000 126,000
ACCUMULATED DEPRECIATION31/3 Disposal 9,000 1-JanBal bf 30,000
31-DecBal cf 35,550 Depre (current yr) 14,550
44,550 44,550
DISPOSAL A/C
31/3Equipment 30,000 31/3lEquipment 18,000 Accu Depre 9,000
P&L ( loss from disposal) 3,000
30,000 30,000
Example 1.14 pg 28 :
The following is the information on the equipment owned by Company ABC on 31 deC 2007 :
Equipment RM 100,000Accu deprec ( 30,000 )
70,000
On 31 March 2008, an equipment bought on 1April 2006 RM 30,000Is exchanged with a new equipment valued at RM 26,000. TheExchange value is RM 18,000. Depreciation for the equipmentIs 15% per year ( REDUCING BALANCE METHOD ).
Prepare the relevant ledger entries on 31 Dec 2008 :
SOLUTION :
FY
OLD EQUIPMENT
NEW EQUIP
BALANCE OF EQUIP DEPRE.
1/4/2006 RM30,000
31/3/2008
RM26,000
RM100k-disposed RM30k
RM
70,000
0615% X 30,000 X 9/12 3,375 3,375NBV 26,625
07 15%X 26,625 3994 3994
NBV 22,631
70000-AD FOR
DISPOSED ASSET
0815% X 22631 X 3/12 849
15% X 26,000 X
9/12 2,92515% X 47,369 7105 3774
NBV 21782 NBV 23,075 40,264 ACCU.DEPRE 8218
Cost 70,000-Accu depre (22,631)NBV 08 47,369
- Depre (08) 15% (7105)40,264
Full Accu depre RM30,000 – accu
depre for disposed aset
RM7369= 22,631
Improve Your understanding …Solve Q1 – Q3