On January 1st 2018 Farah Company purchased a machine at a list price of Rs. 100000.The installation of the machine a part was damaged and repaired at a cost of Rs. 2200. the machine had a working life 14000 hours and a salvage value of Rs. 1400. The company’s accounting year ends on December 31st. during the year 2016 the machine worked for 1800 hours during 2017 for 2400 hours and 2018 for 1200 hours. Require a. Determine the depreciable cost of machine b. Compute depreciation expense for the years 2016 , 2017 and 2018. c. Give adjusting and closing entries to record depreciation the years 2016, 2017 and 2018. d. Show how the machine will appear in the balance sheet on December 31st 2018.
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.
On January 1st 2018 Farah Company purchased a machine at a list price of Rs. 100000.The installation of the machine a part was damaged and repaired at a cost of Rs. 2200. the machine had a working life 14000 hours and a salvage value of Rs. 1400. The company’s accounting year ends on December 31st. during the year 2016 the machine worked for 1800 hours during 2017 for 2400 hours and 2018 for 1200 hours. Require
a. Determine the
b. Compute depreciation expense for the years 2016 , 2017 and 2018.
c. Give adjusting and closing entries to record depreciation the years 2016, 2017 and 2018.
d. Show how the machine will appear in the balance sheet on December 31st 2018.
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