1. Tutorial 6: Accounting for Fixed Asset
1. A machine was bought on 1 January 2000. The following details are given concerning it:
RM
Cost 20,000
Cost of installation 200
Legal fees to purchase fixed asset 300
Length of estimated working life 5 years
Scrap value at the end of its working life Nil
It is to be depreciated using the straight line method.
a. Give two reasons why this method was chosen.
b. You are required to show:
i. the journal entries for the amount set aside for depreciation on 31 December 2002 and
the closing of the Depreciation Account to the Profit and Loss Account.
ii. the Depreciation Account, the Provision for Depreciation Account and the Machine
Account for the accounting periods ending 31 December 2000 to 31 December 2002.
c. What is the net book value of the fixed asset on:
i. 31 December 2000
ii. 31 December 2001
iii. 31 December 2002
2. A firm bought a machine costing RM4,000 on 1 April 2001 and paid for it in cash.
Depreciation of 20% on cost per annum was allowed on the machine. A Provision for
Depreciation Account was set up to record the accumulated depreciation. On Balance
Day, 31 December 2002, the machine was sold off for RM2,500.
You are required to show:
a. The necessary journal entries to record the disposal of the machine.
b. The Machine Account, the Provision for Depreciation Account and the Disposal
of Machine Account on 31 December 2002
3. Hui started business on 1 July 2002 and bought two vehicles for RM9,000 each, paying
by cheque. He decided to depreciate the vehicles each year at the rate of 20% per annum
of their original cost. Depreciation was to be recorded in a separate Provision for
depreciation Account. On 30 September 2003, after allowing for the year’s depreciation,
he sold one of the vehicles for RM7,200, which he put into the bank. On 1 December, he

2. bought another new vehicle on credit from Boon Motors Ltd for RM12,000.
You are required to show:
a. The Vehicles Account.
b. The Provision for Depreciation on Vehicles Account for the two years 2002 and
2003, paying special attention to dates and details and assuming that his financial
year ends on 31 December every year.
c. The Disposal of Vehicle Account.