X purchased a secondhand machinery on 1-2-2018 for Ro.50,000 paid Ro.11,000 for its overhauling and Ro.5,000 for its installation which was completed by 31-3-2018.The company provides depreciation on its machinery at 15% per annum on diminishing balance method from the date it is use and closes its books on December 31 every year. On 1-10-2019 a repair work was carried out on the machine and Ro.5,000 were paid for the same. The machine was sold on 31-10-1995 for a sum of Ro.11,000 and an amount of Ro.1000 was paid as dismantling charges. a) Name the method that assumes that an asset should be depreciated more in the earlier years and less in later years of use. b) Did the Machine have any salvage value?
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.
X purchased a secondhand machinery on 1-2-2018 for Ro.50,000 paid Ro.11,000 for its overhauling and Ro.5,000 for its installation which was completed by 31-3-2018.The company provides depreciation on its machinery at 15% per annum on diminishing balance method from the date it is use and closes its books on December 31 every year. On 1-10-2019 a repair work was carried out on the machine and Ro.5,000 were paid for the same. The machine was sold on 31-10-1995 for a sum of Ro.11,000 and an amount of Ro.1000 was paid as dismantling charges.
a) Name the method that assumes that an asset should be
b) Did the Machine have any salvage value?
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