Extract from the statement of P&L and OCI of Don Ltd for year ended 30 June 20X8 and the Balance Sheet at 30 June 20X7 and 20X8 are given below. 20X7 20X8 Sales $2,120,000 Interest revenue $3,000 Loss on sale of plant and equipment ($25,000) Current Assets Interest receivable $1,500 $3,000 Non-current assets Plant and equipment (at cost) $410,000 $425,000 (-) Accumulated depreciation ($85,000) ($102,000) Loan to CEO $60,000 $45,000 Current liabilities Trade Payables $14,200 $34,250 Additional information: On 1 January 20X8 Don Ltd sold plant and equipment with a carrying amount of $75,000 (cost $100,000) and received $50,000 cash. An item of plant and equipment was purchased on 29 June 20X8. Not all of this was paid for with cash. $30,000 of this amount was purchased on credit and is in the trade payables balance at 30 June 20X8. Don Ltd treats interest received as an investing activity. Required: Calculate the following amounts for cash flow statement; I. Interest received II. Proceeds from sale of plant and equipment III. Loan to CEO IV. Purchase of plant and equipment V. Net cash flows from investment activi
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Extract from the statement of P&L and OCI of Don Ltd for year ended 30 June 20X8 and the Balance Sheet at 30 June 20X7 and 20X8 are given below.
|
|
20X7 |
20X8 |
|
Sales |
|
$2,120,000 |
|
Interest revenue |
|
$3,000 |
|
Loss on sale of plant and equipment |
|
($25,000) |
|
|
|
|
|
Current Assets |
|
|
|
Interest receivable |
$1,500 |
$3,000 |
|
Non-current assets |
|
|
|
Plant and equipment (at cost) |
$410,000 |
$425,000 |
|
(-) |
($85,000) |
($102,000) |
|
Loan to CEO |
$60,000 |
$45,000 |
|
Current liabilities |
|
|
|
Trade Payables |
$14,200 |
$34,250 |
Additional information:
- On 1 January 20X8 Don Ltd sold plant and equipment with a carrying amount of $75,000 (cost $100,000) and received $50,000 cash.
- An item of plant and equipment was purchased on 29 June 20X8. Not all of this was paid for with cash. $30,000 of this amount was purchased on credit and is in the trade payables balance at 30 June 20X8.
- Don Ltd treats interest received as an investing activity.
Required:
Calculate the following amounts for cash flow statement;
I. Interest received
II. Proceeds from sale of plant and equipment
III. Loan to CEO
IV. Purchase of plant and equipment
V. Net
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