A company purchased Machinery at a cost of Rs. 600000 having salvage value of Rs. 100000 and life is to be estimated 5 years. After 3 years machinery disposed of as per below, Sale of Asset at Rs. 450000 Trade in Allowance Rs. 280000, New Asset Cost Rs. 700000 Retirement of Asset without any consideration Required: Give entries in the General Journal to record the disposal of Machinery under given conditions separately
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.
Question
A company purchased Machinery at a cost of Rs. 600000 having salvage value of Rs. 100000 and life is to be estimated 5 years. After 3 years machinery disposed of as per below,
Sale of Asset at Rs. 450000
Trade in Allowance Rs. 280000, New Asset Cost Rs. 700000
Retirement of Asset without any consideration
Required: Give entries in the General Journal to record the disposal of Machinery under given conditions separately
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