ACC204 Assignment: Depreciation Methods and Lease Accounting Analysis

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Added on 2023/04/23

AI Summary

This document presents a comprehensive solution to an accountancy assignment, covering various aspects of depreciation and lease accounting. It includes calculations for depreciation using the straight-line, sum-of-digits, declining-balance, and units-of-production methods. Furthermore, it demonstrates journal entries related to building and land revaluation, as well as detailed accounting for finance leases from both the lessor and lessee perspectives, including the calculation of present value, interest revenue, and lease liability. The assignment also addresses accounting for annual leave obligations, providing relevant journal entries for expense recognition and leave payments.

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Running Head: ACCOUNTANCY 0
Accountancy

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ACCOUNTANCY 1
Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
Part A...........................................................................................................................................4
Part B............................................................................................................................................4
Part C............................................................................................................................................5
Part D...........................................................................................................................................6
Question 4........................................................................................................................................6
Part A...........................................................................................................................................6
Part B............................................................................................................................................7

ACCOUNTANCY 2
Question 1
Straight Line Method
2012 2013 2014 2015 2016 2017
Cost of Truck 65000
Residual Value 5000
Depreciation 10000 10000 10000 10000 10000 10000
2012 2013 2014 2015 2016 2017
Sum of Digits method 0.286 0.238 0.190 0.143 0.095 0.048
Cost of truck 65000
n(n+1)/2 21
Depreciation 18571 15476 12381 9286 6190 3095
Declining
Method 2012 2013 2014 2015 2016 2017
Cost of truck 65000
60000.
0 41666.7
27777.
8
18518.
5
12345.
7 8230.5
Residual Value 5000
Depreciation
18333.
3 13888.9 9259.3 6172.8 4115.2 2743.5
Depreciation Rate 33%
2012 2013 2014 2015 2016 2017
Production
Method 246000 28000 34000 42000 55000 68000 19000
0.11 0.14 0.17 0.22 0.28 0.08
Cost of truck 65000
Residual Value 5000 60000 60000 60000 60000 60000 60000
Depreciation 6829.3 8292.7
10243.
9
13414.
6
16585.
4 4634.1

ACCOUNTANCY 3

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ACCOUNTANCY 4
Question 2
Journal Entries
Date Particulars Debit Credit
30th June
2018
Buildin
g 800000
To cash 800000
30th June
2018 Loss on Revaluation 100000
To Building Account 100000
30th June
2018 Accumulated Depreciation 100000
To Building Account 100000
30th June
2018 Building Account 200000
To revaluation Surplus 200000
30th June
2018 Land
100000
0
To cash
100000
0
30th June
2018 Land 100000
To Profit on Revaluation of Land 100000
30th June
2018 Factory Land 900000
To cash 900000
30th June
2018 Loss on Revaluation 200000
To Factory land 200000

ACCOUNTANCY 5
Question 3
Part A
Present value of the minimum lease
payments 316990
Fair value 351140
Hence, it is the finance lease 90%
Cash flows
Interest rate
@10% Present Value
180000
100000 0.909090909 90909.091
100000 0.826446281 82644.628
100000 0.751314801 75131.480
100000 0.683013455 68301.346
Present Value 316987
Part B
In the books of the
Lessor
Date
lease
Receipt
Interest
revenue
Receivable
reduction
lease Receivable
Balance
7/1/2019 - - - 351140
30/06/2020 100000 35114 64886 286254
30/06/2021 100000 28625.4 71374.6 214879.4
30/06/2022 100000 21487.94 78512.06 136367.34
30/06/2023 150000 13636.734 136363.266 4.074

ACCOUNTANCY 6
Journal Entries
Date Particulars Debit Credit
7/1/201
9
Lease Receivable
351140
To Sales Revenue 351140
7/1/201
9 Cost of goods Sold 180000
To inventory 180000
Date Particulars Debit Credit
30/06/202
0 Cash at Bank 100000
To Interest Revenue 35114
To Lease Receivable 64886
Part C
In the books of the
Lessee
Date
Payme
nt
Interest
Expense
Liability
Reduction
Lease liability
Balance
7/1/2019 - - - 316990
30/06/2020 100000 31699 68301 248689
30/06/2021 100000 24868.9 75131.1 173557.9
30/06/2022 100000 17355.79 82644.21 90913.69
30/06/2023 100000 9091.369 90908.631 5.059
Journal Entries
Date Particulars Debit Credit
7/1/2019 Lessee's truck 351140
To Lessee’s Liability 351140
7/1/2019 Interest Expense 31699
To Leased Liability 68301
To Cash at bank 100000
30/06/202
0 Depreciation Expense 63398

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ACCOUNTANCY 7
To Accumulated Depreciation 63398
Part D
Journal entries
Date Particulars Debit Credit
30/06/202
3 Interest Expense 9091
To Leased Liability 90909
To Cash at bank 100000
30/06/202
3 Depreciation Expense 63398
To Accumulated Depreciation 63398
30/06/202
3 Truck Account
50000
To cash 50000
30/06/202
3 Truck Account
316990
To Lease Truck 316990
30/06/202
3 Accumulated Depreciation Leased Truck 253592
To accumulated Depreciation Truck 253592
Question 4
Part A
For 48 weeks at normal pay rate 100000*48/52
$
92,307.69
For 4 weeks inclusive of loading 100000*4/52*1.175
$
9,038.46
Total Salary and Annual leave
$101,346.1
5

ACCOUNTANCY 8
Following will be the entry in case the lightning Bolt Limited recognizes the annual leave
obligation throughout the year.
Particular
s Debit Credit
Annual Leave Expense
Dr.
$
174.00
To provision for annual leave $ 174.00
Part B
If Lopez was to take two weeks annual leave, keeping in mind that the tax deducted is 1200, the
following journal entry will be as follows.
Particular
s Debit Credit
Provision for Annual Leave
$4,519.2
3
To PAYG Tax Payable
$1,200.0
0
To Cash at
Bank
$3,319.0
0
Journal entry for when Lopez is on Holidays
Particular
s Debit Credit
Annual Leave Expense
Dr.
$
174.00
To provision for annual leave
$
174.00