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Activity 7.3
Consider two separate buildings in a school whereby one is used for classrooms and
the other as administration block, then respond on the following questions:
(i) If the two buildings were constructed at the same time and have the same quality,
will they have the same useful life? Explain with reasons.
(ii) With reasons, explain which of the depreciation methods covered in this chapter
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is appropriate to use in charging depreciation in each of the two buildings.
(iii) Explain possible way(s) for disposing the building once they reach the end of
their useful life.
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Example 7.14
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Majiji Secondary school had a pick-up truck that was purchased some years back for
TZS 20,000,000. On 1 April 2022 the school decided to dispose of the pick-up on
st
a part exchange deal in addition to TZS 25,000,000 cash paid to acquire a new truck
whose market value was TZS 32,000,000. At the time of disposal, the old pick up was
valued at TZS 5,000,000 and its accumulated depreciation was TZS 14,000,000.
Required: Show the journal entries and ledger accounts to record disposal of the old
truck and acquisition of a new pick-up truck.
Solution 7.14
The journal entries to record this event would be:
Debit Credit
Date Description Folio TZS TZS
“000” “000”
1 April New pick-up truck 30,000
st
2022 Accumulated depreciation 14,000
Loss on disposal of pick-up truck 1,000
Cash account 25,000
Pick-up truck (old) 20,000
To remove from books the disposed
old pick-up truck, record the loss on
disposal of old pick-up truck, record
acquisition of new pick-up truck and
close accumulated depreciation of the
disposed pick up.
Student’s Book Form Five
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