A Factory is engaged in the production of silk fabric of different types. Mr. jo
ID: 2385730 • Letter: A
Question
A Factory is engaged in the production of silk fabric of different types. Mr. john one of the directors, bought latest embroidery machines for its newly established embroidery unit for Rs. 2,450,000/- on 1st January 2011. The company depreciates machinery @10% p.a. The machinery will be disposed off at the end of 5th year at Rs.1,280,000/-. The accounts are closed on 31st December each year.Prepare the Fixed Asset Schedule regarding machinery showing the columns
of Years, Cost, Depreciation charges, Accumulated depreciation and Written
down value for five years using the following methods separately:
a) Straight line method
b) Diminishing balance method
also calulate profit and loss on the disposal of machinery under both a & b methods
(Use of proper tables and titles)
Explanation / Answer
a) Straight Line Method
2,450,000 – 1,280,000 = 1,170,000
Depreciation charges = 1,170,000 /5 = 234,000
Year
Cost
Depreciation
Acc. Depreciation
W.D.V.
01/01/2011
2,450,000
234,000
234,000
2,216,000
01/01/2012
2,333,000
234,000
468,000
1,982,000
01/01/2013
2,216,000
234,000
702,000
1,748,000
01/01/2014
2,099,000
234,000
936,000
1,514,000
01/01/2015
1,982,000
234,000
1,170,000
1,280,000
Profit / Loss on sale of machinery = 1,280,000 – 1,280,000 = 0
a) Diminishing Line Method
Year
Cost
Depreciation
Acc. Depreciation
W.D.V.
01/01/2011
2,450,000
245,000
245,000
2,205,000
01/01/2012
2,205,000
220,500
465,500
1,984,500
01/01/2013
1,984,500
198,450
663,950
1,786,050
01/01/2014
1,786,050
178,605
842,555
1,607,445
01/01/2015
1,607,445
160,745
1,003,300
1,446,700
Loss on sale of machinery = 1,446,700 – 1,280,000 = 166,700
Year
Cost
Depreciation
Acc. Depreciation
W.D.V.
01/01/2011
2,450,000
234,000
234,000
2,216,000
01/01/2012
2,333,000
234,000
468,000
1,982,000
01/01/2013
2,216,000
234,000
702,000
1,748,000
01/01/2014
2,099,000
234,000
936,000
1,514,000
01/01/2015
1,982,000
234,000
1,170,000
1,280,000
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