mgt101 GDB solution spring 2011

Financial Accounting GDB
The cost of Asset to be capitalized for balance sheet=Rs.550000
 (Follow Note # 1 & note # 2)
 note # 1
Cost Paid to Purchase Machinery
 note # 2
Cost of Asset to be capitalized for balance sheet
Cost Paid to Purchase Machinery Rs.490000
Add Transportation Expense Rs.20000
Add Insurance-in-transit Rs.5000
Add Installation ExpenseRs.35000
Cost of Asset To be Capitalized For Balance sheet Rs.550000
2. The Annual Depreciation Expense for the Year 20x3 under straight line method:
Depreciation Expense under Straight Line method= cost-residual value/n
Depreciation Expense under Straight Line method = 550000-50000/10
Depreciation Expense under Straight Line method= 500000/10
Depreciation Expense under Straight Line method  = Rs.50000
List price of Machinery    Rs.500,000
Less 2 % discount Rs.10000
Cost Paid to Purchase Machinery
So, Annual Depreciation Expense under Straight Line method=Rs50000
3. The Annual Depreciation Expense for the Year 20x4 under declining Balance Method
Year Particular Depreciation Written Down value
Depreciable Cost                 Rs.550000
20x3 550000*22% 121000 429000
20x4 429000*22% 94380 334620
Working No 3
Depreciation Rate    = 1-n RV/c
Depreciation Rate    =1-10 50000/550000
Depreciation Rate       =1-10 .09090909
Depreciation Rate     =1-.78
Depreciation Rate  =22%
 So, Annual Depreciation Expense for the Year 20x4 under declining Balance Method=Rs. 94380

Solution NO:2
(1)

Price of Machinery 500,000

Discount 10,000

Cost of Machinery 490,000

Transportation expenses 20,000

Insurance 5,000

Installation cost 35000

Total Cost of Machinery 550,000





(2)

Annual Depreciation

Cost of Machinery Rs.550,000

Residual Value Rs. 50,000

Number of years 10

So Cost of Machinery-Residual Value

Number of years

550,000-50,000
10
=50,000



Straight Line Method

Date

Particulars

Amount

Date

Particulars

Amount

Jun 1

20x3

Purchase

550,000





31 Dec

20x3

By Depreciation A/c

Balance c/d

50,000

45,000

Jun 1

20x4

Balance b/d

4,50000











(3)

Declining Method

Formula is

= 1-n RV/c

So we calculate =1-10 50000/550000

=1-10 .09090909

=1-.78

= 22%

Date

Particulars

Amount

Date

Particulars

Amount

Jun 1

20x3

Purchase

550,000





31 Dec

20x3

By Depreciation A/c

Balance c/d

121,000

429,000

Jun 1

20x4

Balance b/d

429,000

31Dec

20x4

By Depreciation A/c

Balance c/d

94,380

334,620