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(d) If the asset was bought at the beginning of year 1, but was not used at all until year
2 (and it is confidently anticipated to last until year 6), state under each method
the appropriate depreciation charge in year 1, and briefly justify your answer.
9. Mr. Machange is a renowned businessman for running a successful restaurant in
Kishumba Ward, Tarime district. He believes that, depreciation provides him with
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a reserve to purchase new assets. One of his hotel cooks has blown up his deep
freezer, but Machange knows he has the funds to replace it in the accumulated
depreciation account. As an Accountant, you know that, he is completely wrong
and have grown tired of listening to him talking about this issue. You are also
aware that, he will not listen to what you have to say. However, you know that,
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he is good at reading memos relating to his business thus you decide to write him
a memo about the problem he is facing and the essence of depreciation in assets
management.

Required: Write a letter to Mr. Machange, among others, explain what depreciation
is all about and the reasons for maintaining depreciation account in
business financial records. Furthermore to explain, why his views are
not correct.
10. Bagonza Limited owned three transport trucks at 1 April 2021:
st
Truck J purchased 21 May 2012, cost TZS 31,200,000,
st
Truck K purchased 20 June 2014, cost TZS 19,600,000,
th
Truck L purchased 1 Jan. 2016, cost TZS 48,800,000.
st
Depreciation is charged annually at 20 per cent on cost on all vehicles in use at the end
of the year. During the year ended 31 March 2022, the following transactions occurred:
st
(a) 1 June 202: truck K was involved in an accident and considered to be a write
st
off by the insurance company which paid TZS 10,500,000 in settlement.
(b) 7 June 2021: truck M was purchased at the cost of TZS 32,800,000
th
(c) 21 Aug. 2021: truck J was sold for TZS 7,000,000
st
(d) 30 Oct. 2021: truck N was purchased at the cost of TZS 39,000,000
th
(e) 6 March 2022: truck N was considered not to be suitable for carrying the type
th
of goods required and was exchanged for truck P. The value of truck P was
deemed to be TZS 37,600,000.

Required: Prepare the ledger accounts to record the above transactions for the year
ending 31 March 2022 and bring down the balances at 1 April, the same
st
st
year.
11. Makame Transport Ltd owned the following motor vehicles as at 1 April 2021:
st

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