BAC1 (BSM 1313)
2004/2005
Supplementary Continuous Assessment

Question 4

(A) Copper Limited purchased a new lorry during the year 2003 at $120,000
and the following were paid: import tax $60,000, import freight and
insurance $20,000, 1-year licence $5,000.

Required:

(a) State the causes for depreciation; and                   (10 marks)

(b) Calculate the cost of purchase for the new lorry.         (4 marks)

(B) Cepa Ltd purchased a second-hand motor lorry on 1 July 2002 at a cost
of $100,000. Another new lorry was purchased on 1 April 2003 at
$120,000. On 1 May 2003, the company sold the first motor lorry for
$70,000.

The company's policy was to depreciate motor lorry on a straight line
basis at 20% per annum with a full year's charge in the year of
purchase but no charge in the year of sale. The financial year end of
the business is 31 December.

Required:

Record the above transactions with dates in the following ledger
accounts for Cepa Ltd. for the year ended 31 December 2002 and 2003:

(i) Motor lorry account                                    (6 marks)
(ii)Provision for depreciation - motor lorry account          (6 marks)
(iii)Disposal of motor lorry account                        (4 marks)
(Total: 30 marks)

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