Q4. Al Dhahabi Mills Ltd. purchases a machinery which costs RO 20,000. The useful life of the machine is 10 years and the annual rate of depreciation is 8% per annum, depreciation being calculated on WDV method. After 10 years, the existing machine has to be replaced by a new one which will cost 250% more than the book value of the existing machine at that time. a) If company sells existing machine at scrap value, What is the extra amount the company will require at the end of 10th year to replace the existing machine by a new one? b) Do you agree with company's decision to sell the existing machine after 10 years and buy new one. Give reasons to your answer

Q4. Al Dhahabi Mills Ltd. purchases a machinery which costs RO 20,000. The useful life of the machine is 10 years and the annual rate of depreciation is 8% per annum, depreciation being calculated on WDV method. After 10 years, the existing machine has to be replaced by a new one which will cost 250% more than the book value of the existing machine at that time. a) If company sells existing machine at scrap value, What is the extra amount the company will require at the end of 10th year to replace the existing machine by a new one? b) Do you agree with company's decision to sell the existing machine after 10 years and buy new one. Give reasons to your answer

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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Concept explainers

Mortgages

A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.

Mortgage

The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.

Question

Q4. Al Dhahabi Mills Ltd. purchases a machinery which
costs RO 20,000. The useful life of the machine is 10 years
and the annual rate of depreciation is 8% per annum,
depreciation being calculated on WDV method. After 10
years, the existing machine has to be replaced by a new one
which will cost 250% more than the book value of the
existing machine at that time.
a) If company sells existing machine at scrap value, What
is the extra amount the company will require at the end
of 10th year to replace the existing machine by a new
one?
b) Do you agree with company's decision to sell the
existing machine after 10 years and buy new one. Give
reasons to your answer

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