2020 JYSS 3N POA EOY P2 Q6

6 The following balances were extracted from the books of Ash, a florist on 31 August 2020.

 

$

Cost of sales

123 860

Sales revenue

145 000

Sales returns

500

Utilities expenses

8 200

Motor vehicles

30 600

Insurance expense

18 300

Discount allowed

1 500

Discount received

3 600

Commission income

28 900

Capital, 1 September 2019

18 000

Fixtures and fittings at cost

25 000

Accumulated depreciation for fixtures and fittings

10 000

Accumulated depreciation for motor vehicles

3 060

Cash at bank

3 400

Cash in hand

1 200

Inventory

13 200

Trade receivables

17 200

Trade payables

15 100

Bank loan

20 000

Drawings

700

Additional information at 31 August 2020

1. Utilities expenses of $500 was still owing.

2. Insurance expenses of $2000 was paid in advance for the next financial period.

3. Fixtures and fittings are to be depreciated at 20% per annum using the straight-line method.

4. Motor vehicles are to be depreciated at 10% per annum using the reducing balance method.

REQUIRED

a. State two causes of depreciation of non-current assets.

[2]

b. When will you use the reducing balance method of depreciation instead of the straight line method of depreciation?

[2]

c. Prepare the statement of financial performance for the year ended 31 August 2020.

[10]

d. Prepare the statement of financial position as at 31 August 2020.

[10]

[TOTAL 24]

SOLUTION
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a)

Physical wear and tear, legal limits, usage or obsolescence.

b)

Prudence theory requires non-current assets to be recorded at net book value so as not to overstate the value of assets.