# Thread: mgt101 Financial Accounting GDB idea solution spring June 2011

1. ## mgt101 Financial Accounting GDB idea solution spring June 2011

Semester Spring 2011

Financial Accounting (MGT101)

This is to inform that Graded Discussion Board (GDB)

Discussion Question

On 1st January 20X3, a company purchased a machinery having list price of Rs. 500,000 with the condition of making full payment within 15 days from the date of purchase to avail discount equal to 2% of the list price.

The company incurred transportation expenses Rs. 20,000 and insurance-in-transit Rs. 5,000. The company availed the discount & installed the machinery at the cost of Rs. 35,000.

The estimated useful economic life of the asset is 10 years with the residual value of Rs. 50,000.

Calculate:

(1) The cost of the asset to be capitalized for balance sheet purpose;

(2) The annual depreciation expense for year 20X3under straight line depreciation; &

(3) The annual depreciation expense for year 20X4under declining balance method.  Reply With Quote

2. please send me mgt101 gdb 2  Reply With Quote

3. MGT-101 GDB solution

1. The cost of Asset to be capitalized for balance sheet=Rs.550000
Working No 1
Cost Paid to Purchase Machinery
Working No 2
Cost of Asset to be capitalized for balance sheet
Cost Paid to Purchase
Machinery
Rs.490000
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
Rs.490000

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  Reply With Quote