Question textRecord the following transaction in the relevant accounts for the business using Debit and Credit entries. You are not required to close off the accounts. If you feel that an account does not need any entries made to it, simply enter a dash/hyphen -
On the first day of the year a business purchases a van at a cost of £20,000 to be used for 4 years. The business uses a straight line depreciation policy. On the very last day of the year, the business sells the van for £18000. The business charged a full years depreciation in the year of disposal. Record all parts of the transaction to fully show the debit/credit impact on each relevant account: purchase of the van; depreciation of the van; disposal of the van; gain/loss on disposal. NOTE: Please ensure you enter your answers following the format used in the question. You do not need to use £. Just the numerical answer. Do not use any decimal points. For example 1200 or 1,200 NOT 1.200 NOT 1,200.00 NOT 1.200,00 [table]
Cash | | Van DR | CR | | DR | CR Answer 1 Question 4 | Answer 2 Question 4 | | Answer 3 Question 4 | Answer 4 Question 4
Van Acc. Depreciation | | Capital DR | CR | | DR | CR Answer 5 Question 4 | Answer 6 Question 4 | | Answer 7 Question 4 | Answer 8 Question 4
Income Statement | | Prepayment DR | CR | | DR | CR Answer 9 Question 4 | Answer 10 Question 4 | | Answer 11 Question 4 | Answer 12 Question 4
[/table]Please answer all parts of the question.

Question

Question textRecord the following transaction in the relevant accounts for the business using Debit and Credit entries. You are not required to close off the accounts. If you feel that an account does not need any entries made to it, simply enter a dash/hyphen -
On the first day of the year a business purchases a van at a cost of £20,000 to be used for 4 years. The business uses a straight line depreciation policy. On the very last day of the year, the business sells the van for £18000. The business charged a full years depreciation in the year of disposal. Record all parts of the transaction to fully show the debit/credit impact on each relevant account: purchase of the van; depreciation of the van; disposal of the van; gain/loss on disposal. NOTE: Please ensure you enter your answers following the format used in the question. You do not need to use £. Just the numerical answer. Do not use any decimal points. For example 1200 or 1,200 NOT 1.200 NOT 1,200.00 NOT 1.200,00 [table]
Cash |  | Van DR | CR |  | DR | CR Answer 1 Question 4 | Answer 2 Question 4 | | Answer 3 Question 4 | Answer 4 Question 4
Van Acc. Depreciation |  | Capital DR | CR |  | DR | CR Answer 5 Question 4 | Answer 6 Question 4 | | Answer 7 Question 4 | Answer 8 Question 4
Income Statement |  | Prepayment DR | CR |  | DR | CR Answer 9 Question 4 | Answer 10 Question 4 | | Answer 11 Question 4 | Answer 12 Question 4
[/table]Please answer all parts of the question.

BlackTom AI · Accepted Answer

We start by restating the scenario and identifying the required accounting treatments for each part of the transaction.

First, the initial purchase:
- The van is bought for 20000 on the first day of the year. The entry is: Debit Van (non-current asset) 20000; Credit Cash 20000. This records the asset acquisition and the cash outflow.

Second, depreciation for the year (straight-line over 4 years):
- Annual depreciation = Cost / Useful life = 20000 / 4 = 5000 per year.
- Since depreciation is charged for the year of disposal as well, we record depreciation expense: Debit Depreciation Expense 5000; Credit Accumulated Depreciation (a contra-asset) 5000. This increases expense and increases accumulated depreciation, reducing the net book value of the asset.

Third, disposal at the end of the year:
- At disposal, we remove the asset’s cost and its accumulated depreciation from the books and recognize any gain or loss on disposal.
- Carrying amount immediately before disposal = Cost 20000 − Accumulated Depreciation 5000 = 15000.
- Proceeds from sale = 18000.
- Gain on disposal = Sale proceeds − Carrying amount = 18000 − 15000 = 3000.

The disposal entry combines the cash received, the de-recognition of the asset and its accumulated depreciation, and the gain:
- Debit Cash 18000 (increase in cash from sale).
- Debit Accumulated Depreciation 5000 (removing the accumulated depreciation since the asset is disposed).
- Credit Van 20000 (to remove the asset’s cost from the books).
- Credit Gain on disposal 3000 (recognizing the profit from disposal).

Now summarizing the debit/credit impacts for each part:
- Purchase of the van: Debit Van 20000; Credit Cash 20000.
- Depreciation of the van (for the year): Debit Depreciation Expense 5000; Credit Accumulated Depreciation 5000.
- Disposal of the van: Debit Cash 18000; Debit Accumulated Depreciation 5000; Credit Van 20000; Credit Gain on disposal 3000.

These entries together reflect the entire sequence: acquisition, annual depreciation including the year of disposal, and the disposal with gain calculation. Note that the calculations use integers with no currency symbols and no decimals, as requested. If you were expected to present this in a predefined tabular format, you would place the corresponding amounts under the appropriate Debit (DR) and Credit (CR) columns for each account involved (Cash, Van, Accumulated Depreciation, Depreciation Expense, and Gain on disposal).

MSIN0004_24-25_T2 Individual Online Assessment (25% weighting)

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