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Lecture 9worksheet_NCA - Lecture 9 worksheet NCA Lecture 9...

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Unformatted text preview: Lecture 9 worksheet NCA Lecture 9 ‐ NCA worksheet An asset is: (see slide 4) Note your answer here: The recognition criteria for an asset is: (see slide 5) Note your answer here: Provide examples of the different types of assets: Examples of Current Assets: Examples of Non Current Assets (NCA): What do mean when we say the cost of the asset is more than you may original think? (see slide 17 ­ 19) Give examples of the costs included in a building; a computer? 1 Lecture 9 worksheet NCA Acquisition Cost example Q: Smith Ltd purchased a large machine to use in its operations. The following costs were incurred: • • • • • • • 1. Invoice price of machine $85 000 2. Transportation costs $1 900 3. Architect’s fees: advised company on the best position for the machine within the factory $1 500 4. Wages for our employees assisted in installing the machine $1 400 5. Professional electricians (not our employees) who installed the machine $4 200 6. Damage to existing machines by small fire caused by our employees who incorrectly changed some wires $9 200 7. Cost to demolish and then reconstruct a wall because the machine was too big to fit through the existing door $9 000 Required: Determine the cost of the new machine. Record your answer here: An example question: R&M verses Capitalization Chester Ltd: manufactures & installs fences and purchased machinery $150,000 by borrowing the cash. They acquired a bank loan at 6.5% pa simple interest, interest only in arrears payable 31 Dec annually. Machinery useful life 10 yrs Insurance during transit $1,500 paid cash Paid cash to specialist contractor to install Equipment $3,500 $1,200 to repair broken saw not covered by insurance or warranty Required: Journalise the acquisition of the asset & R&M charges 2 Lecture 9 worksheet NCA What is the cost of acquisition? What is the journal entry for the purchase of the asset? What is the journal entry for the R&M? What is depreciation? (see slides 27 – 32) Note your answer here: What are the 3 main methods of depreciation? (see slides 33 – 36) Note your answer here: 3 Lecture 9 worksheet NCA How do we calculate the straight line depreciation method? Use the lecture example (slide 38) Cost of acquisition: $40,000; Useful life: 5 years; Residual value: $5,000 Show the journal to record the depreciation? Dr CR Calculate the reducing balance method for depreciation (slide 41) Cost $40,000 depreciation rate 25% Use the units of production method to calculate the deprecation for each year? Machine cost 25,000 produces 10,000 over its 4 yr useful life: 3500 yr 1; 4000 yr 2; 1500 yr 3; & 1,000 yr 4. Draw a depreciation schedule to show the deprecation charged each year? 4 ...
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