Question 1
(38 marks)
Vorinax Exchange had the following balances (amongst others) in their books on 1 September
2022:
Vehicles
Accumulated depreciation vehicles
During the year ended 31 August 2023 the following transactions took place pertaining to
vehicles:
On 28 February 2023, a new vehicle was bought for R231 000 cash.
On 1 June 2023, an old vehicle, which had been bought on 1 December 2020 for
R280 000, was sold on credit for R157 500.
Vorinax Exchange depreciates all their vehicles at a rate of 20% per annum according to the
reducing balance method. Ignore VAT.
REQUIRED:
1.1
Show the following accounts in the books of Vorinax Exchange for the financial year
ended 31 August 2023. Show all depreciation calculations.
(27)
Vehicles
Accumulated depreciation on vehicles
Asset disposal
1.2
Why is it important for a company to track the depreciation of its assets?
(2)
1.3
How might the sale of assets impact a company's financial statements?
(4)
1.4
How did the sale of the old vehicle affect Vorinax Exchange's books in terms of the
Vehicles and Accumulated Depreciation Vehicles accounts?
(2)
1.5
What is the significance of ignoring VAT in the transactions mentioned?
(3)
