- 10 Marks
Question
The draft statement of financial position of Tinkong Ltd as at December 31, 2023, depicts the following:
Description | GH¢ |
---|---|
Plant and Machinery – Cost | 4,954,824 |
Less: Accumulated Depreciation | 1,917,016 |
Net Book Value | 3,037,808 |
On reviewing the accounts of the business, its auditor found that the records have been correctly recorded except for the following events:
- On January 17, 2023, a contract was signed for the purchase of a machine for GH¢450,000 which is to be delivered on July 17, 2024. The company made an advance payment of GH¢180,000 on signing of the contract and the balance was to be paid on delivery of the machine. The advance payment was debited to the plant and machinery account.
- The cost of a new plant amounting to GH¢1,080,000 was acquired on January 21, 2023, and debited to the plant and machinery account. However, the cost of installation amounting to GH¢120,000 was debited to the repairs account.
Depreciation is charged on a reducing balance method at 10% per annum. Depreciation on new assets commences in the month in which the asset is acquired.
Required:
Prepare the following accounts indicating the closing balances as at December 31, 2023: i) Plant and Machinery
ii) Accumulated Depreciation – Plant and Machinery
Answer
i) Plant and Machinery Account
ii) Accumulated Depreciation – Plant and Machinery Account
- Topic: Non-current assets and depreciation
- Series: MAR 2024
- Uploader: Theophilus