Problem1. The financial year of the Glassware Ltd will end on 31 December 2008. At 1 January 2008, the company had in use equipment with the total accumulated cost of Rs 135,620 which had been depreciated by the total of Rs 81,734. Throughout the year ended 31 December 2008, Glassware Ltd bought new equipment costing Rs 47,800 and sold off equipment which had originally cost Rs 36,000 and that had been depreciated by Rs 28,224, for Rs 5,700. No further sales or purchases of equipment are planned for December. The policy of the company is to depreciate equipment at 40% using the diminishing balance method. A full year’s depreciation is provided for on all equipment in use by the company at end of each year.
Required:
Prepare the following ledger accounts for the year ended 31 December 2008:
(i) Equipment account
(ii) Provision for depreciation on equipment account
(iii) Asset disposal account.
(iv) Give three causes of depreciation and for each give the example of type of fixed asset for which that cause is appropriate.