On 31 August 2011 the following extract was taken from the balance sheet of Stavros. Non-current assets Equipment Office Computers Cost $ 60 000 8 000 68 000 Accumulated depreciation $ 24 000 5 600 29 600 NBV $ 36 000 2 400 38 400 The following transactions took place during the year ended 31 August 2012: 1 On 31 January 2012, equipment purchased on 1 April 2009, at a cost of $28 000, was sold for $10 000. Payment was received by cheque. 2 On 1 February 2012, new equipment was purchased at a cost of $35 000. 3 On 20 March 2012, office computers were purchased for $600. Stavros has the following depreciation policy: Equipment is depreciated at the rate of 20% per annum using the straight-line method. Office computers are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. A full year's depreciation is charged on equipment and office computers in the year of purchase. No depreciation is charged on equipment in the year of sale. REQUIRED

1. (a)(i)Explain the term depreciation.[2]
2. (a)(ii)State two causes of depreciation. 1 2[2]
3. (b)State one advantage of using the straight-line method of depreciation.[2]
4. (c)(i)Prepare the following ledger accounts for the year ended 31 August 2012: Provision for depreciation of equipment account[8]
5. (c)(ii)Equipment disposal account[8]
6. (d)Complete the following balance sheet (extract) for the non-current assets on 31 August 2012. Non-current assets Cost $ Accumulated depreciation $ NBV $ Equipment Office Computers[6]