50.1K

Verified Solution

Link Copied!

Embele Trucking Limited is a haulage contractor. At 1 May 2014 the company had three lorries, details of which are as follows:

Lorry registration number Date purchased Cost

GH.000

GR 1720-11 1 July 2011 16,000

GR 1721-13 1 February 2013 21,000

GR 1722-14 1 April 2014 31,000

During the year to 30 April 2015, the following lorry transactions took place:

1. GR 1721-11 was sold on 31 July 2014 for GH3 million on cash terms. On 1 August 2014 Embele Trucking Limited replaced it with a new lorry, registration number GR 1780-14 for which he paid GH 35 million in cash.
2. On 1 December 2014, the new lorry GR 1780-14 was involved in a major accident, and as a result was completely written off. The company was able to agree a claim with his insurance company, and on 31 December 2014 he received GH 30 million from the insurance company. On 1 January 2015 he bought another lorry (registration number GR 1781-2015) for GH41 million.
3. During March 2015, the company decided to replace the lorry bought on 1 April 2014 (GR 1722-14) with a new lorry. It was delivered on 1 April 2015 (GR 1783-2015). The company agreed a purchase price of GH26 million for the new lorry, the terms of which were GH 20 million in part exchange for the old lorry and the balance to be paid immediately in cash.

Notes:

1. Embele Trucking Limited uses the straight-line method of depreciation.
2. The lorries are depreciated over a five-year period by which time they are assumed to have an exchange value of GH 1 million each.
3. Month wise deprecation is to be charged.
4. Embele Trucking Limited does not keep separate ledger accounts for each individual lorry.

Required: In accordance with IAS 16,

1. Write up the following accounts for the year to 30 April 2015:

1. lorries account
2. lorries disposal account
3. allowance for depreciation on lorries account.

2. Show how the lorries account and the allowance for depreciation account would be presented in Embele Trucking Limiteds statement of financial position as at 30 April 2015.

Answer & Explanation Solved by verified expert

See Answer