Muscat chocolates Company purchases equipment on January 1, 2017, at a cost of OMR 100000. The asset is expected to have a service life of 4 years and a residual value of OMR 20000. Instructions: (a) Calculate the annual rate of depreciation. Amount of depreciation for each from 2017 to 2019 using the straight-line depreciation method. (b) Calculate the amount of depreciation for each from 2017 to 2019 using the reducing balance method. (c) What would be the difference in the depreciation expense for the year ending 31st December 2019 based on using either the straight-line method or the reducing-balance method?

Muscat chocolates Company purchases equipment on January 1, 2017, at a cost of OMR 100000. The asset is expected to have a service life of 4 years and a residual value of OMR 20000. Instructions: (a) Calculate the annual rate of depreciation. Amount of depreciation for each from 2017 to 2019 using the straight-line depreciation method. (b) Calculate the amount of depreciation for each from 2017 to 2019 using the reducing balance method. (c) What would be the difference in the depreciation expense for the year ending 31st December 2019 based on using either the straight-line method or the reducing-balance method?

Name: Muscat chocolates Companypurchases equipment on January 1,2017, at a
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Description: Muscat chocolates Companypurchases equipment on January 1,2017, at a cost of OMR 100000. Theasset is expected to have a servicelife of 4 years and a residual value ofOMR 20000.Instructions:(a) Calculate the annual rate ofdepreciation. Amount of depr

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

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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Muscat chocolates Company
purchases equipment on January 1,
2017, at a cost of OMR 100000. The
asset is expected to have a service
life of 4 years and a residual value of
OMR 20000.
Instructions:
(a) Calculate the annual rate of
depreciation. Amount of depreciation
for each from 2017 to 2019 using the
straight-line depreciation method.
(b) Calculate the amount of
depreciation for each from 2017 to
2019 using the reducing balance
method.
(c) What would be the difference in
the depreciation expense for the year
ending 31st December 2019 based
on using either the straight-line
method or the reducing-balance
method?

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