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MGT101 Financial Accounting Assignment 2 Solution Spring Semester June 2013
A company, whose accounting year is calendar year, purchased machinery inclusive of installation charges amounting to Rs. 250,000 on 1st January 2008.
On 1st October 2012, the machinery has become obsolete and is sold for Rs. 60,140.
Company charged the deprecation @20% per annum on plant and machinery. It is the policy of the company to charge the deprecation of all fixed assets on the basis of use under diminishing balance method.
Required:
1. Prepare depreciation schedule for five years showing the four columns i.e. Years, Depreciation expense, Accumulated depreciation and Book value.
2. Calculate the profit or loss on disposal of machinery.
Solution:
Prepare depreciation schedule for five years showing the four columns i.e. Years, Depreciation expense, Accumulated depreciation and Book value.
Years
Depreciation expense
Accumulated depreciation
Book value.
01-January-2008
250,000
31-December-2008
50,000
50,000
200,000
31-December-2009
40,000
90,000
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160,000
31-December-2010
32,000
122,000
128,000
31-December-2011
25,600
147,600
102,400
31-December-2012
15,360
162,960
87,040
Calculate the profit or loss on disposal of machinery.
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Book Values
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Book value after five years Rs. 87,040
Sale price Rs. 60,140
Profit on sale Rs. 26,900(87,040– 60,140)
QUESTION-02
Required:
Based on the above information, you are required to calculate the following for the period ended on 31
st December 2012:
1. Net sales
2. Gross purchases
3. Administration expenses
4. Financial expenses
5. Current assets
6. Current liabilities
Following information is available of a business concern for the year of 2012.
Items
Rs.
Gross sales
900,000
Return inwards
50,000
Return outwards
40,000
Net purchases
950,000
Gross loss
200,000
Advertising expenses
200,000
Distribution expenses
100,000
Salaries of clerical staff
300,000
Office rent
250,000
Bank charges
50,000
Long term loan taken from bank on 1
st January @ 12% per annum
500,000
Cash
90,000
Accounts receivable
60,000
Plant and machinery
300,000
Building
900,000
Accounts payable
35,000
Short term borrowings
25,000
Solution:
1. Net sales:
=Sales-Sales Return
=900,000 – 50,000
=850,000
2. Gross purchases:
=Net Purchase + Purchase Return
=950,000 + 40,000
=990,000
3. Administration expenses:
=Salaries of clerical staff+ Office rent
=300,000 + 250,000
=550,000
4. Financial expenses:
= Long term loan taken from bank on 1st January @ 12% per annum + Bank charges
=60,000 + 50,000
=110,000
5. Current Assets:
=Cash + Accounts Receivable
=90,000 + 60,000
=150,000
Current Asset
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Term Loans
Required
Cashing
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6. Current liabilities:
=Loan (Long Term + Short Term) + Accounts Payable
= 465,000(440,000+25,000) +35,000
=500,000
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