Question

Information in the table below extracted from the latest financial reports of two Boursa Kuwait companies, Kuwait Cement Company and Gulf Cement Company. Average depreciation rate, average useful life and average age of the plant, machinery, and equipment are also given for both companies.

KUWAIT CEMENT COMPANY	Dec 31, 2018	Dec 31, 2019
Cost of Machinery and Equipment	206,413,378	209,941,511
Accumulated Depreciation	(91,537,736)	(97,605,912)
Book value of Machinery and Equipment	114,875,642	112,335,599
Depreciation Expense of the year	5,324,443	6,087,276
Average annual depreciation rate	0.026	0.029	0.027
Average age (years)	17.19	16.03
Average useful life(years)	38.77	34.49	36.63
GULF CEMENT COMPANY	Dec 31, 2018	Dec 31, 2019
Cost of Plant and Machinery	1,034,015,381	1,063,371,135
Accumulated Depreciation	(663,193,114)	(721,075,602)
Book value of Plant and Machinery	370,822,267	342,295,533
Depreciation Expense of the year	44,288,349	57,882,488
Average annual depreciation rate	0.043	0.054	0.049
Average age (years)	14.97	12.46
Average useful life (years)	23.35	18.37	20.86

QUESTION 1)

(a) Provide at least two reasons for using lower depreciation rate as in the Kuwait Cement Company case. (15 pts - 100 words) – (The reasons need to be related to the incentives explained on page 79-80 of your textbook.)

Reason 1:

Reason 2:

(b) Provide at least two reasons for using higher depreciation rate as in the Gulf Cement Company case. (15 pts - 100 words) – (The reasons need to be related to the incentives explained on page 79-80 of your textbook.)

Reason 1:

Reason 2:

leave that text book pagr and resolve it ur way

Answer 1

1. Providing at least two reasons for using lower depreciation rate as in the Kuwait Cement Company case.

Buying of some machine or equipment when the year, the cost of a machine or device bought is 2784400 of which discount rate may change, so the charge of the machine or tool or equipment or device changes from the new asset obtained.

Reason 2-

The business or firm or organization may have a reduced discount percentage or discount price to get higher earning or gain or percentage, to take a loan from the bank. A change of 27% of discount is to give more extra interest or gain or earning in financials.

QUESTION-2

Explaining Higher depreciation rate as in the Gulf Cement Company

Reason-1

Discount increased or raised as a sequence of machine or device sold while the year and tackle of appliances or machines have a common or ordinary price or charge or value of discount or decrease is of more percentage or %. Block has machinery having a more % of discount. So the discount imposed is higher though there is a trade of machinery.

Reason-2

Firm or Bussiness or organization requires to give less interest or gain or profit therefore, it has given more extra discount. To reveal more investments or costs or charged in financials, discounts or reduction is such an amount or investment that is managed by the business or firm or corporation as per its conditions.

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