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Topic: Depreciation (Cost of Machine) Made by Sir Hyder Ali

This document contains several questions related to calculating depreciation costs for various assets. It includes details on the purchase price, useful life, salvage value, and other relevant information for machines, equipment, buildings, and other fixed assets. The document asks to calculate depreciation using different methods like straight-line, declining balance, and sum of years digits. It also provides examples of transactions involving disposal of old assets through sale, trade-in, or retirement from use. The goal is to record these depreciation and disposal transactions correctly in journal entries.

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Haroon Khatri
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119 views4 pages

Topic: Depreciation (Cost of Machine) Made by Sir Hyder Ali

This document contains several questions related to calculating depreciation costs for various assets. It includes details on the purchase price, useful life, salvage value, and other relevant information for machines, equipment, buildings, and other fixed assets. The document asks to calculate depreciation using different methods like straight-line, declining balance, and sum of years digits. It also provides examples of transactions involving disposal of old assets through sale, trade-in, or retirement from use. The goal is to record these depreciation and disposal transactions correctly in journal entries.

Uploaded by

Haroon Khatri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Topic: Depreciation (Cost of machine)

Made by Sir Hyder Ali

Q # 1) New machine was purchased by Hydro Tech


at a list price of Rs. 40,000; 2% trade discount, the
credit terms were 2/10, n/30. Payment of the invoice
was made within the discount period. The payment
6% sales tax on the net price. Hydro Tech also paid
transportation charges of Rs. 610 on the new
machine as well as Rs. 760 for installing the
machinery in the appropriate locations. During the
unloading and installation work, some of the
machines fell from forklift and were damaged.
Repair of the damaged parts cost Rs. 2,710. After the
machine had been in use for 3 months, it was
thoroughly cleaned and lubricated at a cost of Rs.
260.
INSTRUCTION: Compute the Cost of Machine
Q # 2) Brenner Graphics, a newly organized St. Louis corporation, purchased typesetting
equipment having a list price of Rs. 204,000 from a manufacturing in the New England area.
Credit terms for the transaction were 2/10, n/30. Brenner Graphics paid the invoice within the
discount period, as well as an additional 7% sales tax on the net price. Other payments relating to
the acquisition of the equipment were a freight bill of Rs. 2,596 and a labor cost for installing the
equipment of Rs. 4,210. During the installation process, an accident caused damage to the
equipment, which was repaired at cost of Rs. 5,000. As soon as the equipment was in place, the
company obtained insurance on it for a premium of Rs. 1,800.
INSTRUCTION: Compute the Cost of Equipment
Q # 3 On April 02, 2009 the Global Company acquired equipment. It has estimated useful life
of 3 years with salvage value Rs. 5,000 the following expenditure were incurred on it.
1. Billed Price Rs. 275,000.

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2. Freight Charges Rs. 2,000 and Transit Insurance Rs. 3,000.
3. Installation Expenses Rs. 25,000
4. Three years Fire Insurance Rs. 15,000.
INSTRUCTION: Compute the Cost of Equipment

Q # 4 Fazil Company purchased a machine on April 01, 2001 at a list price of Rs. 60,000 with a
trade discount at 5%. The credit terms were 2/10, n/30.
The payment was made within discount period. The company incurred the following
additional expenditure.
i. 4% Sales Tax on the cash price of Machine.
ii. Custom duty Rs. 11,000
iii. Installation and testing cost Rs. 13,000
iv. The Machine was insured against fire and premium paid Rs. 3,500
v. Insurance in transit Rs. 5,000
vi. Fright in Rs. 2,500
INSTRUCTION: Compute the cost of Machine

Topic: Depreciation (Methods of Depreciation)


11-5 page 405 (Full year)
A plant asset acquired on January 2 at a cost of
Rs. 220,000 has an estimated useful life of 10 years.
Assuming that it will have Rs. 20,000 residual
value/salvage value/Scrape value Determine the
depreciation for each of the ten years
(a) by the straight line method,
(b) by the declining-balance method, rate (20%) and
(c) by the sum of the year digit method.
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Practice question 1
A machine acquired at the beginning of the fiscal year at a cost of Rs. 45,200 has an
estimated residual value of Rs. 2,000 and an estimated useful life of 8 years. Determine the
depreciation for each of the first five years

(a) by the straight line method,

(b) by the declining-balance method, using twice the straight line rate (25%) and

(c) by the sum of the year digit method.

11-7 page 405 ( Partial year)


Equipment acquired at a cost of Rs. 33,000 has an estimated residual value of Rs. 3,000 and an
estimated useful life of 5 years. It was placed in service on April 1 of the current fiscal year,
which ends on December 31, Determine the depreciation for the current fiscal and the following
fiscal year by (a) by the straight line method, (b) by the declining-balance method, using twice
the straight line rate (40%) and (c) by the sum of the year digit method.

Practice question

Equipment acquired at a cost of Rs. 72,000 has an estimated residual value of Rs. 3,000 and an
estimated useful life of 5 years. It was placed in service on July 31 of the current fiscal year,
which ends on December 31, Determine the depreciation for the current fiscal and the following
fiscal year by (a) by the straight line method, (b) by the declining-balance method, using twice
the straight line rate (40%) and (c) by the sum of the year digit method.

Topic: Depreciation (Disposal of fixed assets)

Q#1DEPRECIATION
Fast Company engaged into the following transactions.
January 01, The Company traded in its old equipment which had a cost Rs. 60,000 and whose
Accumulated Depreciation was Rs. 20,000. The new equipment had a list price of Rs. 84,000.
The company was granted Rs. 24,000 trade in allowance for the old equipment.

April 02, The Company sold a building for Rs.2,55,000. The building cost Rs. 3,35,000 and had
an accumulated depreciation of Rs. 135,000 (January 01, 2012). The company uses Straight Line

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Method of depreciation. The building was estimated to have a useful of 20 years and salvage
value of Rs. 35,000.

June 30, The Company disposed of a fully depreciated machine which had a cost of Rs. 15,000
with no salvage value.
Required
Record the above transactions in Journal & show all calculations.

Q#2 DEPRECIATIN
Agro Spray Company engages in the following transactions.
January 01, The Company traded in its old computer system as a part of a new system. The old
computer had cost Rs. 40,000 and Accumulated Depreciation of Rs. 14,000. The new computer
had a list price of Rs. 64,000. The company was granted Rs. 24,000 trade in allowance for the
old computer system.

April 02, The Company sold a building for Rs. 93,500. The building cost Rs.3,35,000 and had
an accumulated depreciation of Rs. 1,35,000 (January 01, 2011). The Company uses Straight
Line Method of Depreciation. The building was estimated to have a useful life of 20 years and
salvage value of Rs. 35,000.

June 30, The Company retired a machine: Cost of Machine was Rs. 10,000 and on his data
Allowance for Depreciation was Rs. 8,500 Salvage value was estimated at Rs. 400.
Required
Record each of the transactions listed above (Show all computations).

Q.3 DEPRECIATION
CHAWLA CO. purchased a Computer for Rs. 250,000 on January 02, 2004. The computer was
estimated to have a Salvage Value of Rs. 10,000 and it was to be depreciated at 40% per annum.
The company uses Diminishing Balance Method for Depreciation.
The Accounting year of the Company ends on June 30, each year.
Required
Prepare Journal Entries to record the disposal of computer under each of the following conditions
separately.
A. The Computer is sold for cash Rs. 12,000 on June 30, 2006.
B. The Computer is Trade in for a similar one on March 1, 2008. The trade in allowance was
agreed at Rs. 20,000. The cost of new computer was Rs. 1,50,000.

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