F3 Exercise

[Prajna B]

Exams are approaching and solving question is the best exercise to remember the topic. Try to solve the following question. I will post the answer shortly.


On 1 July 2006, Sigma Ltd purchased plant worth $25,000. The company’s policy is to charge full depreciation in the year of purchase. The rate of depreciation is 15%.

What journal entry should Sigma Ltd post to record depreciation at the year end (31 December 2006)?

A
Dr Depreciation $3,750
Cr Accumulated depreciation $3,750

B
Dr Accumulated depreciation $1,875
Cr Depreciation $1,875

C
Dr Depreciation $1,875
Cr Accumulated depreciation $1,875

D
Dr Accumulated depreciation $3,750
Cr Depreciation $3,750


Thanks

Prajna B

[ABBAS ALI]

ANSWER IS A

[Prajna B]

Is there anyone who can provide the correct answer with its explanation?

Just give it a try..

Let us check whether it matches with my explanation or not...:smile:

Prajna B

[Prajna B]

Exams are approaching and solving question is the best exercise to remember the topic. Try to solve the following question. I will post the answer shortly.


On 1 July 2006, Sigma Ltd purchased plant worth $25,000. The company’s policy is to charge full depreciation in the year of purchase. The rate of depreciation is 15%.

What journal entry should Sigma Ltd post to record depreciation at the year end (31 December 2006)?

A
Dr Depreciation $3,750
Cr Accumulated depreciation $3,750

B
Dr Accumulated depreciation $1,875
Cr Depreciation $1,875

C
Dr Depreciation $1,875
Cr Accumulated depreciation $1,875

D
Dr Accumulated depreciation $3,750
Cr Depreciation $3,750


Thanks

Prajna B


The correct answer is A

Explaination:

The correct entry is:
Dr Depreciation a/c $3,750 (increase in expenses)
Cr Accumulated depreciation a/c $3,750 (decrease in asset)

[ABBAS ALI]

Depreciarion a/c is expense

Accumulated depreciation is contra asset (for e.g plant less accumulated depreciation)

[ABBAS ALI]

The company policy is to charge full year depreciation that why Ans A is correct. If not the policy to charge full year depreciation then Ans C is correct.

Ans B and D are wrong entries.

[iftikharacca]

if company policy is charege fully depeciation in one year so i thinks correct answer is "A"

[wumzy11]

Correct ans is A, depreciation expense account is debited while accumulated depreciation is credited. the amount in the depreciation expense account is then closed off to the income statement.