Question

Question: Write down the solution to the following problems:

A car was purchased on 1/1/1433 AH, and its cost is 140,000 riyals, its value is scrap 16,000 riyals, and its life span is 13 years. Assuming that on 12/30/1438 AH it was decided to sell the car for 30,000 riyals

Required:

A- Calculating the annual depreciation rate using the declining premium over the productive life of the asset.

B- Conducting consumption restrictions for all years of asset depreciation.

C- Determine the result of selling the car, whether there is a profit or loss from the sale process, making a record of selling the car, and proving the profit or loss.

D- Clarify the impact on the final accounts and the statement of financial position.

Answer 1

Answer:-

A). Rate of Depreciation = Depreciation Amount / Cost of Asset *100

Depreciate Amount of Asset = Cost of Asset - Screp Value/No, of useful life

Cost of Asset = 1,40,000 riyals

Screp Value = 16,000 riyals

Number of Useful life = 13years

Depreciate Amount of Car = 1,40,000 - 16,000/13

9,538 riyals

Rate of depreciation = 9,538/1,40,000*100

= 6.81%

B). Consumption of Depreciation every Year is Restricted Upto 9,538 Riyals

C). Determine the Gain/ Loss on Sale of Car :-

Cost of car as on 1/1/1433 = 1,40,000 riyals

Less- Depreciation = (9,5,38)

Cost of car as on 1/1/1434 = 1,30,462

Less- Depreciation = (9,538)

Cost of Car as on 1/1/1435 = 1,20,924

Less Depreciation = (9,538)

Cost of Car as on 1/1/1436 = 1,11,386

Less - Depreciation = (9,538)

Cost of Car as on 1/1/1437 = 1,01,848

Less - Depreciation = (9,538)

Cost of Car as on 1/1/1438 = 92,310

Less - Depreciation = (9,538)

Cost of Car as on 12/30/1438 = 82,772

Less - Sale Price = (30,000)

Loss on sale of Car = 52,772 riyals