Prepare journal entries to record the disposal of computer under each of the following conditions separately: Dispose of the computer for Rs.57, 000 on December 31, 2006. Traded in for a similar computer on December 31, 2008. The Trade-in Allowance was Rs. 20, 000. The cost price of the new computer was Rs. 100, 000
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.
A computer was acquired on January 02, 2000, at a cost price of Rs.150, 000. The estimated salvage value is Rs. 10, 000 and the estimated useful life is 10 years. The business uses
Instructions:
Prepare
- Dispose of the computer for Rs.57, 000 on December 31, 2006.
- Traded in for a similar computer on December 31, 2008. The Trade-in Allowance was Rs. 20, 000. The cost price of the new computer was Rs. 100, 000
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