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Question 6.6: A business includes $110,000 worth of machinery at cost in i...

A business includes $110,000 worth of machinery at cost in its accounts. Its policy is to make a provision for depreciation at 20% per annum straight line. The total provision now stands at $70,000. The business sells for $19,000 a machine which it purchased exactly two years ago for $30,000.

Show the relevant ledger entries.

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PLANT AND MACHINERY ACCOUNT

$ $
Balance b/d 110,000 Plant and machinery disposals a/c 30,000
Balance b/d 80,000
110,000

 110,000
Balance b/d 80,000

PLANT AND MACHINERY ACCUMULATED DEPRECIATION

$ $
Plant and machinery disposals 12,000 Balance b/d 70,000
(20% of $30,000 for 2 years)
Balance b/d 58,000
70,000

 70,000
Balance b/d 58,000

PLANT AND MACHINERY DISPOSALS

$ $
Plant and machinery account 30,000 Accumulated depreciation 12,000
I & E a/c (profit on sale) 1,000

 Cash 19,000
Balance b/d 31,000

 31,000
Check
$
Asset at cost 30,000
Accumulated depreciation at time of sale 12,000
Carrying amount at time of sale 18,000
Sale price 19,000
Profit on sale 1,000

 

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