Depreciation

OMTEX – CLASSES (The Home Of Text) OMTEX – CLASSES N A M E : R O L L N O

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F.Y.B.Com DEPRECIATION F.Y.B.Com 1. Lakxmi Bathi Palaji Enterprises have imported a machine on

1st July 2000 for Rs. 1, 60,000. They also paid customs duty and freight Rs. 80,000 and incurred installation charges Rs. 60,000. Another indigenous machinery costing Rs. 1,000 was purchased on 1st January, 2001. On 1st July, 2002, 1/3rd of the imported machinery was sold for Rs. 34,800/- having become obsolete. Another machinery was purchased to replace the same, for Rs. 50,000/-. Depreciation is to be provided at @ 20% p.a. under WDV. Show the Machinery Account for all the years. 2. Kumar enterprises Ltd. Co. purchased an imported machinery costing Rs. 2, 00,000/- on 1st January 1997 with expected life of 5 years. On 1st January, 1999, the company revalued the machine at Rs. 2, 80,000 and revised its expected life to be two more years. Prepare machinery Account for the four years as per AS – 6 (revised). OMTEX – CLASSES (The Home Of Text)

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1. On 1st January, 1998 Aamin Steel Co. Ltd. had bought some items of machinery for Rs. 50,000. The machinery was depreciated at 10% p.a. on reducing balance system. In the beginning of the fourth year one machine which was obsolete was disposed off for Rs. 4,000, its original cost being Rs. 10,000/-. Prepare the machinery Account for 1998, 1999, 2000 & 2001. 2. Reliance India Co. maintains only one ledger account of all machineries; it purchased the following machinery during 2000-2001 and 2001-2002. Date of Purchase Amount 1 – 4 – 2000 80,000/1 – 7 – 2000 50,000/1 – 10 – 2000 80,000/1 – 4 – 2001 60,000/31 – 3 – 2002 1,00,000/A machine purchased on 1st April, 2000 was burnt on 1st October 2000. The scrap value recovered was Rs. 8,000. A machine purchased on 1st July 2000 was sold for Rs. 65,000 on 31st March, 2002. Depreciation is charged under the straight line method @ 10% p.a. You are required to prepare machinery account for 2 years ended 31 – 3 – 2001 & 31 – 3 – 2002.

OMTEX – CLASSES (The Home Of Text) OMTEX – CLASSES N A M E : R O L L N O

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1. What is depreciation? What are the different methods of (6) charging depreciation? 2. Differentiate between the Fixed Instalment Method and (6) the Reducing Balance Method of charging Depreciation. 3. On 1.1.97 Omtex (The Home Of Text) Co. acquired a machine for Rs. 60,000. The estimated useful life of the machine was estimated to be 5 years. On 1stJan 1999, the company revised its expectation of the life of the asset which was expected to continue for another 2 years. Prepare machinery A/c for 4 years as per AS 6 (Revised).