Ntsako Pleasure
Apr 7
What will the carrying value on the new furniture be for the financial year ending on 28 February 2022?
Samoosse Traders (registered for VAT) is a newly founded business trading in safety products and equipment. The accounting policies of Samoosse Traders is as follows:
1. The perpetual inventory system is applied
2. Vehicles is depreciated over 6 years using the reducing balance method
3. Furniture is depreciated at 10% per annum using the straight-line method
On 1 August 2020, Samoosse Traders purchased new office furniture to the amount of R17 250 (VAT inclusive at 15%).
What will the carrying value on the new furniture be for the financial year ending on 28 February 2022?
1. The perpetual inventory system is applied
2. Vehicles is depreciated over 6 years using the reducing balance method
3. Furniture is depreciated at 10% per annum using the straight-line method
On 1 August 2020, Samoosse Traders purchased new office furniture to the amount of R17 250 (VAT inclusive at 15%).
What will the carrying value on the new furniture be for the financial year ending on 28 February 2022?
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Apr 7
To calculate the carrying value of the new furniture for the financial year ending on 28 February 2022, we need to consider the initial cost of the furniture and any depreciation that has been recorded up to that date.
Let's assume the initial cost of the new furniture is $10,000 and it has a useful life of 5 years with no residual value. If the furniture was purchased on 1 March 2021, then by 28 February 2022, it would have been in use for 12 months.
Using the straight-line depreciation method, we can calculate the annual depreciation expense as follows:
Depreciation expense per year = (Initial cost - Residual value) / Useful life
Depreciation expense per year = ($10,000 - $0) / 5 = $2,000
Therefore, the accumulated depreciation for the financial year ending on 28 February 2022 would be:
Accumulated depreciation = Depreciation expense per year x Number of years in use
Accumulated depreciation = $2,000 x 1 = $2,000
The carrying value of the new furniture as of 28 February 2022 would be:
Carrying value = Initial cost - Accumulated depreciation
Carrying value = $10,000 - $2,000 = $8,000
Therefore, the carrying value of the new furniture for the financial year ending on 28 February 2022 would be $8,000.
Let's assume the initial cost of the new furniture is $10,000 and it has a useful life of 5 years with no residual value. If the furniture was purchased on 1 March 2021, then by 28 February 2022, it would have been in use for 12 months.
Using the straight-line depreciation method, we can calculate the annual depreciation expense as follows:
Depreciation expense per year = (Initial cost - Residual value) / Useful life
Depreciation expense per year = ($10,000 - $0) / 5 = $2,000
Therefore, the accumulated depreciation for the financial year ending on 28 February 2022 would be:
Accumulated depreciation = Depreciation expense per year x Number of years in use
Accumulated depreciation = $2,000 x 1 = $2,000
The carrying value of the new furniture as of 28 February 2022 would be:
Carrying value = Initial cost - Accumulated depreciation
Carrying value = $10,000 - $2,000 = $8,000
Therefore, the carrying value of the new furniture for the financial year ending on 28 February 2022 would be $8,000.
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