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Exam preparation, financial accounting . question & answer
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This is a question and answer for property,plant and equipment, it mainly deals with depreciation
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Property, plant & equipmentCosta Plenty Manufacturers
Costa Plenty Manufacturers Ltd is a company that manufactures and distributes plastic
water bottles across South Africa. The entity is registered for VAT and so are all entities
trading with it. VAT is levied at 15%. The financial year end of the company is 30 June. You
have been requested to assist with the finalisation of the non-current asset section of the
statement of financial position for the year ended 30 June 2016.
1. Delivery trucks
Costa Plenty Manufacturers purchased 3 delivery trucks at a total cost of R 770 040-00
(including VAT) on 30 November 2014. On 1 June 2016, Costa Plenty Manufacturers traded
one of the 3 delivery trucks in for R 180 550-00 (including VAT) on a new delivery truck. The
total purchase price of the new delivery truck amounted to R 373 750 (including VAT). The
balance of the purchase price was settled by EFT on 1 June 2016. The licensing fee of R 1
300-00 (no VAT) to register the truck as well as the insurance for the truck amounting to R
862-50 (including VAT) was paid on 22 June 2016. The new delivery truck was delivered to
Costa Plenty Manufacturers on 1 July 2016, together with the relevant VAT invoice.
Depreciation Policy:
- Delivery trucks are depreciated over their useful lives of 4 years.
- Delivery trucks have an estimated residual value of 20% on the cost of the delivery truck
REQUIRED:
Prepare ALL the relevant journal entries in respect of delivery vehicles as stated in the
above note, as from 1 July 2015. (Including ALL depreciation journals). (27 Marks)
- Show ALL calculations.
- Round all figures to the nearest Rand.
- Journals must be dated.
- Calculations MUST be cross referenced to the journals.
- Leave lines open between journals.
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