mgt101 Financial Accounting GDB idea solution spring June 2011

[Vuhelper]

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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.

[sohil]

please send me mgt101 gdb 2

[Vuhelper]

MGT-101 GDB solution

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1. The cost of Asset to be capitalized for balance sheet=Rs.550000
(Follow W-1 and W-2)
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
Add Transportation Expense Rs.20000
Add Insurance-in-transit Rs.5000
Add Installation Expense Rs.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
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