Assignment BBA Plant Assets Fundamentals of Financial Accounting

Q#1: Using the following data find the cost of asset (Machine): (i) Purchase price = Rs.700,000 (ii) Income tax = Rs.2500 (iii) Custom duty = Rs.7500 (iv) Carriage in = Rs.7000 (v) Insurance in transit = Rs.1500 (vi) Government subsidy = Rs.100,000 (vii) Installation charges = Rs.3500 (viii) Site preparation cost = Rs. 8000 Q#2 ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. Required: (i) Find depreciation rate under straight line method. (ii) Find depreciation under straight line method for 5 years. (iii) Prepare journal entries. (iv) Prepare ledger accounts for: (a) Machinery A/C (b) Depreciation A/C (c) Accumulated Depreciation A/C Q#3: ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. Required: (i) Find depreciation rate under reducing balance method. (ii) Find depreciation under reducing balance method for 5 years. (iii) Prepare journal entries. (iv) Prepare ledger accounts for: (a) Machinery A/C (b) Depreciation A/C (c) Accumulated Depreciation A/C Q#4: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. The rate of depreciation is 10%. The accounting year of ABC and Company ends on 31st December each year. Required:
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(i) Find depreciation under straight line method for 5 years. (ii) Prepare journal entries. Q#5: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. The rate of depreciation is 10%. The accounting year of ABC and Company ends on 31st December each year. Required: (i) Find depreciation rate under reducing balance method. (ii) Find depreciation under reducing balance method for 5 years. Q#6: On 1st April 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. The rate of depreciation is 10%. The accounting year of ABC and Company ends on 31st December each year. Required: Find depreciation under reducing balance method and straight line method for 5 years. Q#7: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. The rate of depreciation is 10%. On 1st October 2007, ABC and Company purchased further machinery for Rs.120,000. The accounting year of ABC and Company ends on 31st December each year. Required: Find depreciation under reducing balance method and straight line method for 5 years.(under six month convention.) Q#8: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The useful life of the asset is estimated to be 10 years. The scarp value of asset at the end of useful life is Rs.50,000. The rate of depreciation is 10%. On 1st October 2007, ABC and Company purchased further machinery for Rs.120,000. The accounting year of ABC and Company ends on 31st December each year. Required: Find depreciation under reducing balance method and straight line method for 5 years.(considering the number of months an asset is used) Q#9: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The asset is expected to produce 1,000,000 units over its useful life. Company produced 200,000 units in 2005, 150,000 units in 2006 and 350,000 units in 2007. Required: Find depreciation for the machinery for three years. Q#10: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The asset is expected to be available for use for 150,000 hours over its useful life. Company used asset as follows: 2005: 30,000 hours, 2006: 45,000 hours and 2007: 20,000 hours. Required: Find depreciation for the machinery for three years.
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Q#11: On 1st January 2005, ABC and Company purchased machinery for Rs.500,000 and incurred installation charges of Rs.75,000. The asset is expected to be available for use for six years. Required: Find depreciation for the machinery for six years using sum of years digit method.

Important Formulae
1. Straight Line Method: Rate of Depreciation =
1 useful life x 100

Deprecation = (Cost scrap value) x Rate 2. Reducing Balance Method: Rate of Depreciation =
Depreciation per annum = (Book Value - Residual Value) x Rate%

Where book value = Cost Accumulated Depreciation 3. Sum of Years digit method: Sum of year digit = n (n+1) 2 Depreciation = (Cost Residual Value) x Digit of the year Sum of year digit 4. Production unit method: Rate of depreciation = Cost Residual value Total estimated production Depreciation = Actual production x Rate of depreciation 5. Machine Hours method: Rate of depreciation = Cost Residual value Total estimated hours Depreciation = Actual hours worked x Rate of depreciation

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