Question

5 (a)     Machine costing OMR 70,000 was purchased on March 1, 2009. The estimated useful life was 8 years and the salvage value was OMR 6,000. On April 30, 2013 the company decided to sale this machine, because it was no longer required. Cash of OMR 50,000 was received on the sale of this machine. The company uses straight line method for charging depreciation expense, and the closing day of the financial accounting year is December 31, of each year.

Required:                                                                                                                                 

1. Calculate the depreciation expense up-to April 30, 2013.
2. Pass adjusting entries to record depreciation on April 30, 2013

Answer 5 (a):

1. Computation of Depreciation Expense Using Straight Line Method

Year	Calculation	Depreciation Expense	Accumulated Depreciation

General Journal

Date	Particulars	Debit OMR	Credit OMR

5 (b)   “Depreciation is the process of allocating the coast of a plant asset to expense in the

              accounting periods benefiting from its use”.

In the light of above definition what may be the possible elements effecting depreciation. Also discuss which method gives highest amount of depreciation in the first year? Why?

Answer 1

5b)

Possibe elements effecting Depreciation

i)Wear and Tear.

ii)Obsolescene.

iii)Exhuastion.

Double Declining Depreciation method gives highest depreciation in the First year ,Based on the Assumption that the Asset will be Used more Productivily in generating revenue ,since asset is used more the detrotiation of asset will also be more.