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# Part 4 l Adjustments for ﬁnancial statements

Review questions
27.1 A company starts in business on 1 January 20X5. You are to write up the vans account and
the provision for depreciation account for the year ended 31 December 20X5 from the information
given below. Depreciation is at the rate of 25 per cent per annum, using the basis that one com-
plete month’s ownership needs one month’s depreciation.
20X5 Bought two vans for £6,900 each on 1 January
Bought one van for £7,200 on 1 August

27.2 A company starts in business on 1 January 20X3, the ﬁnancial year end being 31 December.
You are to show:
(a) The machinery account.
(b) The provision for depreciation account.
(c) The balance sheet extracts for each of the years 20X3, 20X4, 20X5, 20X6.
The machinery bought was:
20X3 1 January 1 machine costing £1,400
20X4 1 July 2 machines costing £600 each
1 October 1 machine costing £1,000
20X6 1 April 1 machine costing £400
Depreciation is over ten years, using the straight line method, machines being depreciated for the
proportion of the year that they are owned.

27.3A A company maintains its ﬁxed assets at cost. Depreciation provision accounts, one for
each type of asset, are in use. Machinery is to be depreciated at the rate of 15% per annum, and
ﬁxtures at the rate of 5% per annum, using the reducing balance method. Depreciation is to be
calculated on assets in existence at the end of each year, giving a full year’s depreciation even
though the asset was bought part of the way through the year. The following transactions in
assets have taken place:
20X5 1 January Bought machinery £2,800, ﬁxtures £290
1 July Bought ﬁxtures £620
20X6 1 October Bought machinery £3,500
1 December Bought ﬁxtures £130
The ﬁnancial year end of the business is 31 December.
You are to show:
(a) The machinery account.
(b) The ﬁxtures account.
(c) The two separate provision for depreciation accounts.
(d) The ﬁxed assets section of the balance sheet at the end of each year, for the years ended
31 December 20X5 and 20X6.

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