Examples of fixed assets include delivery trucks, company parking lots, machinery, factories, tools, furniture, and computers.
The formula for calculating net fixed assets is total fixed assets minus depreciation and liabilities.
Fixed Assets Questions and Answers Grade 12
A fixed asset, also known as long-lived assets or property, plant and equipment, is a term used in accounting for assets and property that may not easily be converted into cash. Fixed assets are different from current assets, such as cash or bank accounts, because the latter are liquid assets.
Example
Vehicle is sold for R40 000 cash.
Cost price of vehicle: R100 000
Accumulated depreciation: R 90 000
Carrying value = R 10 000
Depreciation is calculated at 20% on Cost price
- Additional depreciation: 100 000 × 20% = R20 000
- The carrying value is already R10 000 and that means that depreciation can only be R10 000.
- A fixed asset cannot be depreciated less than the cost price of the vehicle. (And not R9 999!)
| ASSET DISPOSAL | |||
| Vehicle Profit on sale of asset | 100 000 40 000 (Because the principle of R1 is not applied, the profit is R40 000) 140 000 | Accum. depreciation Bank | 100 000 40 000 140 000 |
Example 2 on note 3 in the Financial Statements
REQUIRED:
Complete Note 3 of the Balance sheet
INFORMATION:
Make use of the format and complete Note 3 from the financial Statements.
Name of Company _________________________________
BALANCE SHEET AT ________________________________
| Notes | |
| ASSETS | |
| Non-current assets | |
| Property, plant and equipment |
NOTES TO THE BALANCE SHEET
| 3. Property, plant and equipment | Vehicles |
| Cost Price | |
| Accumulated Depreciation | |
| Carrying value on the last day of the previous year | |
| Movements: | |
| Additions at cost | |
| Disposals at carrying value (book value) | |
| Depreciation for the year | |
| Carrying value on the last day of current year | |
| Cost Price | |
| Accumulated Depreciation | |
| Carrying value on the last day of current year |
Memorandum of example 1
Calculation of Depreciation and cost price and carrying value
| SCHIE TRADERS NO.1 Asset registerPercentage Depreciation: 20 % p.a. at cost price/straight line method Details of depreciation | |||
| Details | Annual depreciation Calculations | Accumulated depreciation | Book value or known as “Carrying value” |
| End of first year | 80 000 × 20%= 16 000 | 16 000 | 64 000 (80 000 – 16 000) |
| End of second year | 80 000 × 20%= 16 000 | 32 000 | (80 000 – 32 000) 48 000 |
| End of third year | 80 000 × 20%= 16 000 | 48 000 | 32 000 |
| End of fourth year | 80 000 × 20%= 16 000 | 64 000 | 16 000 |
| End of fifth year | 80 000 × 20%= 16 000 15 999 (Cannot depreciate R16 000, because of the scrap value of R1. Therefore can only depreciate R15 999) | (64 000 + 15 999) 79 999 | (80 000 – 79 999) R1 |
| SCHIE TRADERS NO.2 Asset registerPercentage Depreciation: 10 % p.a. at carrying value/ book value or called diminishing value Details of depreciation | |||
| Details | Annual depreciation Calculations | Accumulated depreciation | Book value or known as “Carrying value” |
| Cost price R20 000 End of first year | 20 000 × 10% × 6/12 = 1 000 | 1 000 | 19 000 |
| End of second year | 19 000 × 10% = 1 900 | (2 000 + 1 900) 2 900 | (20 000 – 2 900) 17 100 |
| End of third year | 17 100 × 10% = 1 710 | 4 610 | 15 390 |
| End of fourth year | 15 390 × 10% = 1 539 | 6 149 | 13 851 |
| End of fifth year | 13 851 × 10% – 1 385, 10 | 7 534,10 | 12 465,90 |
Memorandum of example 2
REQUIRED:
Complete the note to the financial statements by using the given ledger accounts
Name of Company _________________________________
BALANCE SHEET AT ________________________________
| Notes | ||
| ASSETS | ||
| Non-current assets | 230 000 | |
| Property, plant and equipment (at carrying value) | 230 000 |
NOTES TO THE BALANCE SHEET
| 3. Property, plant and equipment | Vehicles |
| Cost Price | 180 000 |
| Accumulated Depreciation | (60 000) |
| Carrying value on the last day of the previous year | 120 000 |
| Movements: | |
| Additions at cost (150 000 + 50 000) | 200 000 |
| Disposals at carrying value (100 000 – 25000) | (75 000) |
| Depreciation for the year (5 000 + 10 000) | (15 000) |
| Carrying value on the last day of current year | 230 000 |
| Cost Price | 280 000 |
| Accumulated Depreciation | (50 000) |
| Carrying value on the last day of current year | 230 000 |