Question 1 25 marks>
YCH Ltd is in the motor car hire business. The following information came from its Fixed Asset Register on 1 June 2006.
Car number Cost price ($) Date of Purchase
KVD 382H 31 250 1 June 2002
B123 NHY 25 000 23 March 2003
978G PLK 27 500 26 August 2003
C149 USH 30 000 23 January 2005
On 18 May 2007, a new car, number MVD 346J, was purchased on credit from JCC Ltd for $35,000. JCC Ltd agreed a trade-in-price of $1 200 for B123 NHY, which the new car replaced.
All motor cars are depreciated at 40% per annum, using the reducing balance method.
They have a full year’s depreciation ocharged against them each financial year, regardless of the date of purchase, except in the financial year of sale, when no depreciation is charged.
Required:
For the year ended 31 May 2007, draw up
(1) the motor car account <4 marks>
(2) the accumulated depreciation of cars account <8 marks>
(3) the disposal of cars account. <3 marks>
Question 1 25 marks>
YCH Ltd is in the motor car hire business. The following information came from its Fixed Asset Register on 1 June 2006.
Car number Cost price ($) Date of Purchase
KVD 382H 31 250 1 June 2002
B123 NHY 25 000 23 March 2003
978G PLK 27 500 26 August 2003
C149 USH 30 000 23 January 2005
On 18 May 2007, a new car, number MVD 346J, was purchased on credit from JCC Ltd for $35,000. JCC Ltd agreed a trade-in-price of $1 200 for B123 NHY, which the new car replaced.
All motor cars are depreciated at 40% per annum, using the reducing balance method.
They have a full year’s depreciation ocharged against them each financial year, regardless of the date of purchase, except in the financial year of sale, when no depreciation is charged.
Required:
For the year ended 31 May 2007, draw up
(1) the motor car account <4 marks>
(2) the accumulated depreciation of cars account <8 marks>
(3) the disposal of cars account. <3 marks>
Question 2 25 marks>
Yeung was appointed a local agent for the sale of the JCC Mobile Phone on 1 April 2006.
The JCC Mobile Phone is manufactured by YCH Mobile Limited. The company charges its agents an annual service charge of $1 000, payable in advance each year on 1 April. In addition, agents pay Mobile Equipment Limited a commission of 5% of the gross profit on all sales.
During the past two years, the demand for the JCC Mobile Phone increased.
At the same time, YCH Mobile Limited had some raw material shortages and production difficulties. This led to a number of price increases in the manufacturer’s price of the Mobile Phones. However, the agents decided it would be unwise to pass these increased costs on to their customers. Accordingly, throughout 2006 and 2007, a selling price of $5 200 per phone was maintained by the agents.
Yeung’s transactions up to 31 December 2007 are summarized as follows:
2006 Purchases Sales
April 3 @ $3 800
June 1
August 4 @ $4 000
September 3
November 4 @ $4 500
December
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2007 Purchases Sales
January 1
March 5 @ $3 000 (Note 1)
May 6
July 1 (Note 2)
August 2 @ $4 150
November 1
Note 1: This was the purahcse by Yeung of the stock of an agent who had been
declared bankrupt.
Note 2: On 1 July Yeung decided to use one of the mobile phones as a display
facility. Depreciation is to be provided on the phone use as a display
facility at the rate of 20% per annum on cost. The phone will have
a nil estimated residual value.
Required: Compute the value of closing stock by using the methods of
(1)FIFO , (2) LIFO , and (3) average cost
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