Answered: Building at cost 740 Buildings,…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 6MCQ: Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense...

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Question

You are presented with the following trial balance of Carl Ltd at 31 October 2018.
Dr Cr
R,000 R,000
Building at cost 740
Buildings, accumulated depreciation, 1 November 2018 60
Plant at cost 220
Plant, accumulated depreciation, 1 November 2018 110
Land at cost 235
Bank balance 50
Revenue 1,800
Purchases 1,105
Discounts received 90
Returns inwards 35
Wages 180
Energy expenses 105
Trade Payables 250
Trade Receivables 320
Inventory at 1 November 2018 160
Allowance for debtors at 1 November 2018 10
Administrative expenses 80
Director's remuneration 70
Accumulated profit at 1 November 2018 130
10% Debenture 50
Dividend paid 30
R1 Ordinary shares 650
Share premium account 80
3,280 3,280
Additional information as at 31 October 2019.
a. Closing inventory has been counted and is valued at R75,000
b. An invoice of R15 000 for energy expenses for October 2019 has not been received.
c. The allowance for debtors is to be increased to 5% of trade receivable.
d. Buildings are depreciated at 5% per annum on their original cost, allocated 30% to cost of
sales, 30% to distribution costs and 40% to administrative expenses.
e. Plant is depreciated at 20% per annum using the reducing balance method. The entire
charge is to be allocated to cost of sales
f. Tax has been calculated as R45 000 for the year.
g. The current share price of Carl Ltd is R1.30 per share
h. Debenture interest has not been paid for the year.
The items listed below should be apportioned as indicated

	Cost of sales	distribution Costs	Administrative Expenses
Discount Received	-	-	100%
Energy Expenses	40%	20%	40%
Wages	40%	25%	35%
Directors Remuneration	-	-	100%

Prepare the income statement for the year ended 31 October 2019

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Building at cost 740 Buildings, accumulated depreciation, 1 November 2018 60 Plant at cost 220 Plant, accumulated depreciation