Ch17

Question 1

General Journal entry for purchase of NCA

Answer 1

Asset name - Debit
GST Clearing - Debit
Cash at Bank - Credit

Question 2

General Journal entry for purchase of NCA using borrowed funds

Answer 2

Cash at bank - Debit
Loan - Credit

Vehicle - Debit
GST Clearing - Debit
Cash at Bank Credit

Question 3

Steps to record disposal of Asset for cash

Answer 3

1 - Transfer cost of asset to disposal of asset account

GJ
Disposal of Asset - Debit
Asset - Credit

GL - Disposal of Asset
Asset - Debit

2 - Transfer accumulated depreciation of asset to disposal of Asset account

GJ
Accumulated depreciation - Debit
Disposal of Asset - Credit

GL - Disposal of Van
Accumulated depreciation of Asset - Credit

3 - Record proceeds gained from sale of the asset Disposal of Asset account

GJ
Cash at Bank - Debit - when traded in bank becomes asset
Disposal of Asset - Credit

GL - Disposal of Asset
Cash at bank - Credit - if traded in becomes name of asset

4 - record the profit or loss on disposal and close off the disposal of asset account

GJ
Loss on disposal of Asset - Debit
Disposal of Asset - Credit

GL
Loss on disposal of Asset - Credit

Question 4

Asset - General Ledger

Answer 4

Bank - Debit
Disposal of Van - Debit
Cash at bank - Debit
Disposal of Van - Credit

Question 5

Over and under depreciation

Answer 5

Over
- situation where non-current asset has been depreciated too much due to under estimation of its useful life or residual value leading to profit on disposal

Under
- Situation where non-current asset hasn’t been depreciated enough due to over estimation either its useful life or residual value leading to loss on disposal.

Question 6

Loss on disposal of asset

Answer 6

difference between carrying value of asset and the proceeds from disposal of asset. Where proceeds are less than the carrying value

• item is no longer popular or not in demand
• Newer technology or outdated
• Damaged