Exercices
Exercice 1
The Company LDS purchased office furniture on 18 June of year "N" for $7200 including tax, the VAT rate is 20%. The company uses linear amortization. The useful life of the asset is five years. The financial year-end is the end of December.
Step 1: Price Before Tax
Price Excluding Taxes =
Price Including Taxes = $7200
VAT Rate = 20%
Price Excluding Taxes = = $6000
Step 4: Used days
Used days =
Since we bought the furniture on 18 June, we have to calculate the amortization for the first year.
Used days = 192 days
Step 7: Recording for 1st Year
Account for Depreciation, Amortization and Provision = 68
Account for amortization of fixed assets = 28
Exercice 2
Invoice N°112 19/04/2023
Industrial tools: $35 000
VAT 20% : $7 000
Net to be paid : $42 000
The equipment will be commissioned on 25 May. The depreciation period is 7 years (in degressive mode).
Step 1: Price Before Tax
The price before tax is already provided as it is $35 000. We can make sure by calculating it:
Price Excluding Taxes =
Price Excluding Taxes = = $35 000
Step 2: Rates
Linear Rate =
Degressive Annuity rate =
Duration | Original Coefficient |
---|---|
Between 3 and 4 years | 1.25 |
Between 5 and 6 years | 1.75 |
More than 6 years | 2.25 |
Linear Rate = = 0.14 = 14%
Degressive Annuity rate = 32.14%
Step 3: Used months
Used months =
Since we commissioned the equipment on 25 May, we have to calculate the amortization for the first year.
Used months = 8 months
Step 4: Amortization for First Year
Amortization for First Year =
Amortization for First Year = $7499,33
Step 6: Recording for 1st Year
Account for Depreciation, Amortization and Provision = 68
Account for amortization of fixed assets = 28
Exercice 3
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Garel: amount of the receivable 8,820 $ including tax (VAT 20%). We expect to recover 70% of the debt.
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Pépin: amount of the receivable 6,024 $ including tax (VAT 20%). Evaluation of the probable loss: 40%.
Step 1: Amount of the Receivable
Amount of the Receivable =
Amount of the Receivable for Garel = = $7 350
Amount of the Receivable for Pepin = = $5 020
Step 2: Provision
Provision =
For Garel, the provision is the opposite of what we can recover, thus: 30%. (100% - 70%)
Provision for Garel = $2 205
For Pepin, the provision is the percentage of the possible loss, thus: 40%.
Provision for Pepin = $2 008
Step 3: Recording
Account for Depreciation, Amortization and Provision = 68
Account for provision for receivables = 49
Exercice 4
| Customer | Amount incl. VAT | Amount excl. VAT | Existing Provision (%) | Payment in N | Observation | | -------- | ---------------- | ---------------- | ---------------------- | ------------ | --------------- | | A | 10080 $ | 8400 $ | 30% | 5382 $ | Last payment | | B | 3120 $ | 2600 $ | 15% | 598 $ | Increase to 30% | | C | 6420 $ | 5350 $ | 25% | 3100 $ | Last payment | | D | 4440 $ | 3700 $ | 40% | 4440 $ | - | | E | 9000 $ | 7500 $ | 35% | 4100 $ | Reduce to 20% |
Customer A
Step 1: Amount After Payment
Amount After Payment =
Amount After Payment for Customer A = $4 698
Step 2: Amount excluding VAT
Amount excluding VAT =
Amount excluding VAT for Customer A = $3 915
Step 3: Existing Provision
Existing Provision =
Existing Provision for Customer A = $2 520
Step 4: Loss
Since it is the last payment, the loss is the remaining amount after payment (excl. taxes) that the customer will never pay back.
Loss = $3 915
Step 5: Loss VAT
Loss VAT =
Loss VAT for Customer A = $783
Step 6: Provision Needed
Since we declared a loss, the provision needed is now 0.
Step 7: Depreciation or Reversal
The existing provision is $2 520 and the provision needed is 0. Thus, we need to reverse the provision (needed < existing).
Step 8: Table
Customer B
Step 1: Amount After Payment
Amount After Payment =
Amount After Payment for Customer B = $2 522
Step 2: Amount excluding VAT
Amount excluding VAT =
Amount excluding VAT for Customer B = $2 101,67
Step 3: Existing Provision
Existing Provision =
Existing Provision for Customer B = $390
Step 4: Loss
Since it is not the last payment, there is no loss.
Step 5: Provision Needed
Provision Needed =
Provision Needed for Customer B = $630,50
Step 6: Depreciation or Reversal
The existing provision is $390 and the provision needed is $630,50. Thus, we need to depreciate the provision (needed > existing).
Step 7: Table
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