Chapter 14 - Account for NCA (2)

Question 1

What are the steps in a disposal of NCA

Answer 1

1. The disposal of the NCA (as measured by the carrying value)
2. The revenue that has been earned from its disposal (the proceeds on disposal)
3. the profit or loss on the disposal of the asset (measured as the difference between these two amounts)

Question 2

Reducing Balance method of depreciation explained

Answer 2

A NCA might contribute more to revenue at the start of its useful life than at its end, RB method is used.

Question 3

Loss on Disposal of NCA

Answer 3

an expense incurred when proceeds from the disposal of a NCA is less than its Carrying value when disposed

Question 4

Profit on Disposal of NCA

Answer 4

A revenue earned when proceeds from the disposal of a NCA is greater than its Carrying value when disposed

Question 5

Under-Depreciation Definition

Answer 5

when insufficient depreciation expense has been allocated over the life of the NCA due to overstating its residual value and/or useful life, resulting in an overstatement of the asset’s carrying value. Cause for the loss on disposal of NCA

Question 6

Over Depreciation Definition

Answer 6

when excess depreciation expense has been allocated over the life of a non-current asset due to understating its residual value and/or useful life, resulting in an understatement of the asset’s
carrying value

Question 7

Summary of all the entries required for the disposal of NCA (Profit/Loss)

Answer 7

Disposal of Van DR
Van CR
Acc.Depn of Van Dr
Disposal of Van CR
Van/Bank DR
Disposal of Van CR
Loss Disposal of Van Dr
Disposal of Van CR
OR
Disposal of van DR
Profit on Dis Of Van CR
IF TRADE IN
Van DR
GST clearing DR
Bank CR