Answer:
Hand Sanitizer Ltd
Relevant Accounts for the year ended 31st March 2019:
1. Plant Account:
Debit Balance on 1st April 2018 = GH₵375,000
Credit: Disposal of Plants on 31st December 2018 = GH₵40,500 (GH₵22,500 and GH₵18,000)
Debit: New Plants on 31st December 2018 = GH₵52,500
Debit Balance on 31st March 2019 = GH₵387,000
2. Accumulated Depreciation - Plant:
Credit Balance on 1st April 2018 = GH₵157,500
Debit: Disposal of Plants on 31st December, 2018 = GH₵27,427.10
Credit: Depreciation Expense ( 100,350 + 3,937.50) = GH₵104,287.50
Credit Balance on 31st March 2019 = GH₵234,360.40
3. Depreciation Expense:
Debit: Accumulated Depreciation for old plant GH₵100,350
Debit: Accumulated Depreciation for new plants GH₵3,937.50
Total = GH₵104,287.50
4. Disposal of Plants Account:
Debit: Plants = GH₵40,500
Credit: Accumulated Depreciation = GH₵27,427.10
Credit: Cash = GH₵16,500 (12,000 + 4,500)
Debit: Gain from Sale = GH₵3,427.10
Balance = GH₵0
Explanation:
a) Accumulated Depreciation for the disposed plants on reduced balance:
October 2015 to March 2016 for 6 months (30% of GH₵40,500 for 6 months) = GH₵6,075
March 2017 for 12 months = GH₵10,327.50
March 2018 for 12 months = GH₵7,229.25
December 2018 for 9 months = GH₵3,795.35
Total = GH₵27,427.10
b) Reduced Balance for Disposed Plants
October 2015 Cost = GH₵40,500
March 2016 less Depreciation = GH₵6,075
Reduced Balance = GH₵34,425
March 2017 less Depreciation = GH₵10,327.50
Reduced Balance = GH₵24,097.50
March 2018 less Depreciation = GH₵7,229.25
Reduced Balance = GH₵16,868.25
December 2018 less Depreciation = GH₵3,795.35
Reduced Balance = GH₵13,072.90
The depreciation charge for 2016 was for 6 months while the 2018 charge was for 9 months.
