Question

Q.1.1 Hybrid Dealers bought computer equipment for R54 000 on 1 July 2018. The equipment is depreciated at 20% according to the diminishing balance method.

Required:

Prepare the depreciation and closing transfer entries in the general journal of

Hybrid Dealers on 31 March 2019 and 31 March 2020. (15)

Answer 1

Answer:

Step 1:

Depreciation means the loss in value of assets because of usage of assets , passage of time or change in technology.

Since , only 20% is given and not 20% per annum , hence we are charging depreciation at 20% without considering the months.

If 20% per annum is given then depreciation for the year ended 31^st March , 2019 will be charged for nine months and next year for 12 months.

Step 2

Cost of Computer equipment                                                                                        = 54,000

Less :- Depreciation for the year 31^st March 2019 $($54000*$\dfrac {20} {100}$$)$                          = (10,800)          

Written down value as on 1^st April , 2019 $($54000-10800$)$                                         = 43,200

Less :- Depreciation for the year 31^st March , 2020  $($43200*$\dfrac {20} {100}$$)$        = (8,640)                            

Written down value as on 1^st April ,2020 $($43200-8640$)$         = 34,560

Step 3