6. (Where Provision for Depreciation alongwith Asset A/c is to be maintained) A firm writes off 95% of the cost of its machines over 10 years following the S.L. Method leaving the rest 5% as estimated scrap value (ESV). Full depreciation is provided even if an asset is used only for part of a year. On 31-12-13, the original costs of the machines in possession were : (i) those purchased in 2003 or earlier $2,40,000; (ii) those purchased in 2006 80,000; (iii) those purchased in 2010 $60,000. On 30-6-14, a machine purchased in 2003 for $20,000 was sold for $1,800. On 30-11-14, a machine purchased in 2010 for $30,000 was sold for$10,000 and on the same date a new machine was purchased for $90,000. Show the Machinery A/c, Provision for Depreciation A/c and Machinery Sold A/c for the year 2014.
6. (Where Provision for Depreciation alongwith Asset A/c is to be maintained) A firm writes off 95% of the cost of its machines over 10 years following the S.L. Method leaving the rest 5% as estimated scrap value (ESV). Full depreciation is provided even if an asset is used only for part of a year. On 31-12-13, the original costs of the machines in possession were : (i) those purchased in 2003 or earlier $2,40,000; (ii) those purchased in 2006 80,000; (iii) those purchased in 2010 $60,000. On 30-6-14, a machine purchased in 2003 for $20,000 was sold for $1,800. On 30-11-14, a machine purchased in 2010 for $30,000 was sold for$10,000 and on the same date a new machine was purchased for $90,000. Show the Machinery A/c, Provision for Depreciation A/c and Machinery Sold A/c for the year 2014.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:6. (Where Provision for Depreciation alongwith
Asset A/c is to be maintained)
A firm writes off 95% of the cost of its
machines over 10 years following the S.L.
Method leaving the rest 5% as estimated scrap
value (ESV). Full depreciation is provided even
if an asset is used only for part of a year.
On 31-12-13, the original costs of the machines
in possession were :
(i) those purchased in 2003 or earlier
$2,40,000; (ii) those purchased in 2006 80,000;
(iii) those purchased in 2010 $60,000.
On 30-6-14, a machine purchased in 2003 for
$20,000 was sold for $1,800. On 30-11-14, a
machine purchased in 2010 for $30,000 was
sold for$10,000 and on the same date a new
machine was purchased for $90,000.
Show the Machinery A/c, Provision for
Depreciation A/c and Machinery Sold A/c for
the year 2014.
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