Answered: (a): Depreciation is allocation of cost…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Q.3 (a): Depreciation is allocation of cost concept ,not a valuation concept,explain this statement .

(b): Huma Company purchased various types of Assets. Details are as follows:

Assets	Date of Purchase	Cost	Estimated Life /Rate	Method
Building	January 1, 2004	Rs. 8,000,000	20 Years	Straight Line
Machinery	July 1 , 2005	300,000	20%	Diminishing Balance
Equipment	April 1, 2006	440,000	5 Years	Sum of the years digits

On January 10, 2006 the company paid Rs. 100,000 for replacing the plaster of walls of building. It is estimated that the new plaster will extend the life of building from an originally estimated 40 years to a total of 50 years.

Required:

Compute the Depreciation Expense for the year 2004, 2005 and 2006
Record the extra ordinary repair of building in General Journal
Record the Depreciation Expense for the year ended December 31, 2006
Prepare a Partial Balance Sheet as on December 31, 2006

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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