1
XY Ltd provides for depreciation of its machinery at 20% per annum on cost; it charges
for a full year in the year of purchase but no provision is made in the year of sale/disposal.
Financial statements are prepared annually to 31 December.
2005
January 1 Bought machine ‘A’ £10,000
July 1 Bought machine ‘B’ £6,000.
2006
March 31 Bought machine ‘C’ £8,000
2007
October 7 Sold machine ‘A’ – proceeds £5,500
November 5 Bought machine ‘D’ £12,000
2008
February 4 Sold machine ‘B’ – proceeds £3,000
February 6 Bought machine ‘B’ £9,000
October 11 Exchanged machine ‘D’ for machinery valued at £7,000
Prepare
(a) The machinery account for the period 1 January 2005 to 31 December 2008.
(b) The accumulated provision for depreciation on machinery account, for the period 1 January
2005 to 31 December 2008.
(c) The disposal of machinery accounts showing the profit/loss on sale for each year.
(d) The balance sheet extract for machinery at (i) 31 December 2007 and (ii) 31 December 2008.