2020 JYSS 3N POA EOY P2 Q6
6 The following balances were extracted from the books of Ash, a florist on 31 August 2020.
$ | |
123 860 | |
145 000 | |
500 | |
Utilities expenses | 8 200 |
Motor vehicles | 30 600 |
Insurance expense | 18 300 |
1 500 | |
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 |
13 200 | |
Trade receivables | 17 200 |
Trade payables | 15 100 |
Bank loan | 20 000 |
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]
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Physical wear and tear, legal limits, usage or obsolescence.
Prudence theory requires non-current assets to be recorded at net book value so as not to overstate the value of assets.