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Thread: mgt101 Financial Accounting GDB idea solution spring June 2011

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    MIXX mgt101 Financial Accounting GDB idea solution spring June 2011

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    Semester “Spring 2011”

    “Financial Accounting (MGT101)”

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    This is to inform that Graded Discussion Board (GDB)



    Discussion Question



    On 1st January 20X3, a company purchased a machinery having list price of Rs. 500,000 with the condition of making full payment within 15 days from the date of purchase to avail discount equal to 2% of the list price.

    The company incurred transportation expenses Rs. 20,000 and insurance-in-transit Rs. 5,000. The company availed the discount & installed the machinery at the cost of Rs. 35,000.

    The estimated useful economic life of the asset is 10 years with the residual value of Rs. 50,000.

    Calculate:

    (1) The cost of the asset to be capitalized for balance sheet purpose;

    (2) The annual depreciation expense for year 20X3under straight line depreciation; &

    (3) The annual depreciation expense for year 20X4under declining balance method.



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    please send me mgt101 gdb 2

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    MGT-101 GDB solution


    1. The cost of Asset to be capitalized for balance sheet=Rs.550000
    (Follow W-1 and W-2)
    Working No 1
    Cost Paid to Purchase Machinery
    Working No 2
    Cost of Asset to be capitalized for balance sheet
    Cost Paid to Purchase
    Machinery
    Rs.490000
    Add Transportation Expense Rs.20000
    Add Insurance-in-transit Rs.5000
    Add Installation Expense Rs.35000
    Cost of Asset To be
    Capitalized For Balance
    sheet
    Rs.550000
    2. The Annual Depreciation Expense for the Year 20x3 under straight
    line method:
    Depreciation Expense under Straight Line method =cost-residual value/n
    Depreciation Expense under Straight Line method= 550000-50000/10
    Depreciation Expense under Straight Line method=500000/10
    Depreciation Expense under Straight Line method=Rs.50000
    List price of Machinery
    Rs. 500,000
    Less 2 % discount Rs.10000
    Cost Paid to Purchase
    Machinery
    Rs.490000



    So, Annual Depreciation Expense under Straight Line method=Rs50000
    3. The Annual Depreciation Expense for the Year 20x4 under declining
    Balance Method
    Year Particular Depreciation
    Written
    Down value
    Depreciable Cost Rs.550000
    20x3 550000*22% 121000 429000
    20x4 429000*22% 94380 334620
    Working No 3
    Depreciation Rate= 1-n RV/c
    Depreciation Rate=1-10 50000/550000
    Depreciation Rate=1-10 .09090909
    Depreciation Rate=1-.78
    Depreciation Rate=22%
    So,
    Annual Depreciation Expense for the Year 20x4 under declining
    Balance Method=Rs. 94380
    Last edited by Vuhelper; 06-08-2011 at 10:55 AM.

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