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    Accounts Depreciation Assignment

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    Syed Ali Shan
    The document discusses the depreciation of machinery worth Rs. 200,000 over 3 years using straight-line and reducing balance methods. It provides the calculations for depreciation expense and net book value for each year under both methods in a profit and loss extract and balance sheet extract.

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    Accounts Depreciation Assignment

    Uploaded by

    Syed Ali Shan
    39 views5 pages
    The document discusses the depreciation of machinery worth Rs. 200,000 over 3 years using straight-line and reducing balance methods. It provides the calculations for depreciation expense and net book value for each year under both methods in a profit and loss extract and balance sheet extract.

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    The document discusses the depreciation of machinery worth Rs. 200,000 over 3 years using straight-line and reducing balance methods. It provides the calculations for depreciation expense and net book value for each year under both methods in a profit and loss extract and balance sheet extract.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    39 views5 pages

    Accounts Depreciation Assignment

    Uploaded by

    Syed Ali Shan
    The document discusses the depreciation of machinery worth Rs. 200,000 over 3 years using straight-line and reducing balance methods. It provides the calculations for depreciation expense and net book value for each year under both methods in a profit and loss extract and balance sheet extract.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    You are on page 1of 5

    Mishel Azhar

    223568791
    Accounting Assignment : Depreciation
    Submitted to : Sir Ejaz Ayub
    Date : 15.01.2021
    FORMAN CHRISTIAN COLLEGE
    (A CHARTERED UNIVERSITY)
    Q: Nike purchased Machinery worth Rs.200,000 on 1  January 2020 to be installed at its
    st

    Lahore plant. Company evaluates its residual/scrap value to be Rs. 82,400 at the end its
    useful life of 3 years. Company’s management has yet to decide which depreciation
    method to use i.e. straight line basis or reducing balance and has requested you to
    calculate depreciation using both method and evaluate results. For reducing balance
    method company has decided to depreciate asset at 40%.
    Required: Calculate depreciation for three years i.e. 2020, 2021 and 2022 and prepare
    extract of financial statements in the following format. Show your workings separately
    as well. (18 Marks)
     
    Profit and Loss - Extract year 2020 year 2021 year 2022
      Rs. Rs. Rs.
    Depreciation expense - using straight method  38,808  38,808 38,808 
    Depreciation expense - reducing balance method 80,000  48000   28,800
           
           
    Balance sheet - Extract (using Straight line method) year 2020 year 2021 year 2022
      Rs. Rs. Rs.
    Asset - cost  200,000  161,192  122,834
    Accumulated depreciation 38,808  77,616  116,424
    Net book value  161,192  122,384  84,026
           
           
    Balance sheet - Extract (reducing balance method) year 2020 year 2021 year 2022
      Rs. Rs. Rs.
    Asset - cost      
    Accumulated depreciation      
    Net book value      

     
     
    STRAIGHT LINE METHOD
    • Asset description : Machinery
    • Depreciation method : Straight line method
    • Asset cost : Rs. 200,000
    • Residual value: Rs. 82,400
    • Useful life: 3 years
    • Depreciation rate: 0.33
    • Depreciable cost : 117,600

    Year Opening book Depreciation Accumulated Closing book


    value expense depreciation value

    2020 Rs. 200,000 Rs. 38,808 Rs. 38,808 Rs. 161,192

    2021 Rs.161,192 Rs. 38,808 Rs. 77,616 Rs. 122,384

    2022 Rs. 122,834 Rs. 38,808 Rs. 116,424 Rs. 84,026

    Depreciation expense calculation :


    Straight line depreciation rate = 1 / useful life
    =. 1/3
    = 0.33

    Depreciable cost = Asset cost - Residual value


    = 200,000. - 82,400
    = 117,600 Rs

    Depreciation expense = Straight line depreciation rate × Depreciable cost


    = 0.33 ×. 117,600
    = 38,808 Rs
    Closing book value (2020) = Opening book value - Depreciation expense
    =. 200,000. - 38,808
    = 161,192 Rs
    Closing book value ( 2021) =. Opening book value - Depreciation expense
    = 161,192 - 38,808
    = Rs. 122,834
    Closing book value (2022) = Opening book value - Depreciation expense
    =. 122,834 - 38,808
    =. Rs. 84,026

    Reducing Balance method

    Year Depreciation Book vale


    2020 0 Rs.200,000
    Year 1 Rs. 80,000 Rs. 120,000
    Year 2 Rs.48,000 Rs.72,000
    Year 3 Rs28,800 Rs. 43,200

    Year 1 Depreciation :
    40 % of 200,000
    = 40/100 × 200,000
    = 80,000
    Book value year 1
    200,000 - 80,000 = 120,000 Rs

    Year 2 Depreciation
    40 %. Of 120,000
    = 48,000 Rs
    Book value year 2
    120,000 - 48000
    = 72,000 Rs

    Year 3 Depreciation
    40% of 72,000
    = 28,800
    Book value year 3
    72,000 - 28,800
    = 43,200

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