CHAP 1 : ACCOUNTING FOR NON-CURRENT ASSET SPESIFIC OUTCOME : Understand non-current asset Understand the concept of depreciation Understand methods of depreciation Prepare the accounting record for non-current asset

ACCOUNTING FOR NON-CURRENT ASSET Non Current Asset/Fixed Asset Tangible Asset/PPE Example ? Intangible Asset Example? Current Asset

Determining & Recording Non Current Asset Cost Based on MFRS 116 – refer pg 3

Depreciation Depreciation vs amortization vs Depletion Methods of Depreciation Straight Line/Reducing Balance / Sum of Years Digit/ Units of Production Method

DISPOSAL OF ASSET SELLING THE ASSET EXCHANGING WITH OTHER ASSET GIVEN TO THE OTHER PARTY DESTROYED IN DISASTER

EXAMPLE 1.6 ( pg 14 ): An equipment bought on 1 Jan 2003 RM40,000, depreciated 10% straight line method was SOLD at RM16,000 on 31 Dec 2008. AD is RM 24,000. Journal entry : 31/12/08 Dr Cash RM16,000 Accu. Depre RM 24,000 Cr Equipment RM 40,000

EXAMPLE 1.7 ( pg 14 ): An equipment bought on 1 Jan 2003 RM40,000, depreciated 10% straight line method was SOLD at RM20,000 on 31 Dec 2008. AD is RM 24,000. Journal entry : 31/12/08 Dr Cash RM20,000 Accu. Depre RM 24,000 Cr Equipment RM 40,000 P&L ( gain from disposal)RM4,000

Depreciation Convention Term Basis Monthly Basis Full Depreciation In The Year of Purchase, No Depreciation In The Year Of Disposal No Depreciation In The Year of Purchase, Full Depreciation In The Year of Dispsal

Refer your text book Eg 1.9 pg 15

Example 1.12 pg 22 : Mermaid Ltd bought a TRAILER on 30/4/2006 RM 130,000 in cash. The trailer than was exchanged with a LORRY valued at RM 88,000 On 1/7/2008. The exchanged value is RM 74,500 and the remaining balance paid by cheque. The company policy is to depreciate vehicle with STRIGHT LINE METHOD AT 18% PER YEAR. The financial year of the company is at 31 Dec every year. Calculate the depreciation and prepare ledger entries at at 31 Dec 2008 for the following situation : Term Basis Monthly Basis FDP, NDD NDP, FDD

TERM BASIS & MONTHLY BASIS FY TRAILER   LORRY DEPRE. 30/4/2006 RM130,000 1/7/2008 RM88,000 2006 18% X 130,000 X 8/12 15,600 2007 18% X 130,000 23,400 2008 18% X 130,000 X 6/12 11,700 18% X 88,000 X 6/12 7920 19,620 ACCU.DEPRE 50,700

VEHICLE A/C 2008   1-Jan Bal b/f 130000 1-Jul Disposal Disposal (lorry) 74500 31-Dec Bal cf 88000 Bank 13500 218000

ACCUMULATED DEPRECIATION 1-Jul Disposal 50,700 1-Jan Bal bf 39,000 31-Dec Bal cf 7,920   Depre (current yr) 19,620 58,620 DISPOSAL A/C 1-Jul Vehicle 130000 74500   Accu Depre 50,700 P&L ( loss from disposal) 4,800

c. FDP, NDD d. NDP, FDD Refer the summary in your text book.

Example 1.12 pg 22 : ( SAME EXAMPLE, DIFFERENT METHOD ) Mermaid Ltd bought a TRAILER 30/4/2006 RM 130,000 in cash. The trailer than was exchanged with a LORRY valued at RM 88,000 On 1/7/2008. The exchanged value is RM 74,500 and the remaining Balance paid by cheque. The company policy is to depreciate vehicle with REDUCING BALANCE METHOD AT 18% PER YEAR. The financial year of the company is at 31 Dec every year. Calculate the depreciation and prepare ledger entries at at 31 Dec 2008 for the following situation : Term Basis Monthly Basis FDP, NDD NDP, FDD

TERM BASIS & MONTHLY BASIS – REDUCING BALANCE METHOD FY TRAILER   LORRY DEPRE. 30/4/2006 RM130,000 1/7/2008 RM88,000 2006 18% X 130,000 X 8/12 15,600  NBV 114,400  2007 18% X 114,400 20,592 93,808  2008 18% X 93,808 X 6/12 8,443 18% X 88,000 X 6/12 7920 16,363 ACCU.DEPRE 44,635

VEHICLE A/C 2008   1-Jan Bal b/f 130000 1-Jul Disposal Disposal (lorry) 74500 31-Dec Bal cf 88000 Bank 13500 218000

ACCUMULATED DEPRECIATION 1-Jul Disposal 44,635 1-Jan Bal bf 36,192 31-Dec Bal cf 7,920   Depre (current yr) 16,363 52,555 DISPOSAL A/C 1-Jul Vehicle 130000 74500   Accu Depre 44,635 P&L ( loss from disposal) 10,865

Extract of Balance Sheet Extract of P&L Depre 16,363 Loss from disposal 10,865 Extract of Balance Sheet Non Current Asset : Vehicle 88,000 (-) Accu Depre (7,920) 80,080

Example 1.13 pg 26 : The following is the information on the equipment owned by Company ABC on 31 deC 2007 : Equipment RM 100,000 Accu deprec ( 30,000 ) 70,000 On 31 March 2008, an equipment bought on 1April 2006 RM 30,000 Is exchanged with a new equipment valued at RM 26,000. The Exchange value is RM 18,000. Depreciation for the equipment Is 15% per year ( STRAIGHT LINE METHOD ). Prepare the relevant ledger on 31 Dec 2008 :

SOLUTION : FY OLD EQUIPMENT   NEW EQUIP BALANCE OF EQUIP DEPRE. 1/4/2006 RM30,000 31/3/2008 RM26,000 RM100k-disposed RM30k RM 70,000 06 15% X 30,000 X 9/12 3,375 07 15% X 30,000 4,500 08 15% X 30,000 X 3/12 1,125 15% X 26,000 X 9/12 2,925 15% X 70,000 10,500 14,550 ACCU.DEPRE 9,000

EQUIPMENT A/C 2008   1-Jan Bal b/f 100,000 31/3 Disposal 30,000 18,000 31-Dec Bal cf 96,000 cASH 8,000 126,000

ACCUMULATED DEPRECIATION 31/3 Disposal 9,000 1-Jan Bal bf 30,000 31-Dec Bal cf 35,550   Depre (current yr) 14,550 44,550 DISPOSAL A/C 31/3 Equipment 30,000 31/3l 18,000   Accu Depre 9,000 P&L ( loss from disposal) 3,000

Example 1.14 pg 28 : The following is the information on the equipment owned by Company ABC on 31 deC 2007 : Equipment RM 100,000 Accu deprec ( 30,000 ) 70,000 On 31 March 2008, an equipment bought on 1April 2006 RM 30,000 Is exchanged with a new equipment valued at RM 26,000. The Exchange value is RM 18,000. Depreciation for the equipment Is 15% per year ( REDUCING BALANCE METHOD ). Prepare the relevant ledger entries on 31 Dec 2008 :

SOLUTION : FY OLD EQUIPMENT NEW EQUIP BALANCE OF EQUIP DEPRE.   NEW EQUIP BALANCE OF EQUIP DEPRE. 1/4/2006 RM30,000 31/3/2008 RM26,000 RM100k-disposed RM30k RM 70,000 06 15% X 30,000 X 9/12 3,375 NBV 26,625 07 15%X 26,625 3994 22,631 70000-AD FOR DISPOSED ASSET 08 15% X 22631 X 3/12 849 15% X 26,000 X 9/12 2,925 15% X 47,369 7105 3774 21782 23,075 40,264 ACCU.DEPRE 8218

Improve Your understanding … Full Accu depre RM30,000 – accu depre for disposed aset RM7369 = 22,631 Cost 70,000 Accu depre (22,631) NBV 08 47,369 - Depre (08) 15% (7105) 40,264 Improve Your understanding … Solve Q1 – Q3