Question
In: Accounting
Use the following information for the questions 1 2 & 3 On 1 st January 2015...
Use the following information for the questions 1 2 &
3
On 1 st January 2015 Musheer LLC Company started a business of
selling and buying Garments
products at Muscat. The company has brought few assets while
starting the business namely
cash balance RO 32250, Bank balance RO 29750, short term
investments RO 22150. The
company was running successfully the garments products business and
started earning good
profits and the company gradually improved their business during
the first six months also
purchased a machinery 1 st March 2015 RO 175690 and installation
11810 and life of the machine
is 5 years with scrap value of RO 22000. The company has brought
additional capital of RO
1050000 in addition to the regular profits and purchased a building
for RO 142750 on 1 st
September 2015 and a loan also borrowed from the Bank Muscat by
showing the past months
profits on October 2015 of RO 105000 at 7% interest payable every
year. The company with the
positive progress in the garment products business they also
started a new branch at Ibra with a
capital of RO 122900. The company had bought one Equipment on 1 st
June 2016 in another
branch for RO 97280 with the installation value of RO 22820 which
has estimated life of 5 years
with the estimated scrap value of The Company of 13500 and the
equipment is depreciated at
25% per annum on reducing balance method/written down value method.
The Company closes it
books of account every year on 31 st December and Mr. Muneer a new
accountant has been
appointed in the company who is a fresh Bachelor Graduate in
accounting with high GPA but he
wants your expertise knowledge to understand the concept of the
depreciation and
You are required to prepare depreciation schedule for the
following non-current assets
showing all the working notes
A) Equipment for five years under reducing balance
method or written down value
method
B) .Machinery for five years under Straight Line
Method
C)Building for five years under straight line method
Note: please write the answer in text format in word
Solutions
Expert Solution
| Cell Reference | Particulars | Machinery | Building | Equipment | |||
| A | Date of Purchase | 1st March 2015 | 1st September 2015 | 1st June 2015 | |||
| B | Purchase Price of asset | 175,960 | 142,750 | 97,280 | |||
| C | Installation cost of asset | 11,810 | 22,820 | ||||
| D=B+C | Total capital cost of asset | 187,770 | 142,750 | 120,100 | |||
| E | Salvage value/scrap value | 22,000 | 13,500 | ||||
| F=D+E | Depreciable value of asset | 165,770 | 142,750 | 106,600 | |||
| G=F/H | Depreciation per year | 33,154 | 28,550 | ||||
| H | Life of Asset | 5 Years | 5 Years | 5 Years | |||
| H | Method of Depreciation | Straight-line method | Straight-line method | 25% Written down value method | |||
| Depreciation schedule for Machinery under straight-line depreciation method | |||||||
| Particulars | Opening value of asset | Depreciation | Closing value of asset | ||||
| Depreciation from 1st March 2015 to 31 December 2015 (10 Months) | 187,770 | 27,628 | 160,142 | ||||
| Depreciation for 2016 | 160,142 | 33,154 | 126,988 | ||||
| Depreciation for 2017 | 126,988 | 33,154 | 93,834 | ||||
| Depreciation for 2018 | 93,834 | 33,154 | 60,680 | ||||
| Depreciation for 2019 | 60,680 | 33,154 | 27,526 | ||||
| Depreciation from 1st January 2020 to 28th February 2020 (2 Months) | 27,526 | 5,526 | 22,000 | ||||
| Total | 165,770.00 | ||||||
| Depreciation schedule for Building under straight-line depreciation method | |||||||
| Particulars | Opening value of asset | Depreciation | Closing value of asset | ||||
| Depreciation from 1st September 2015 to 31 December 2015 (4 Months) | 142,750 | 9,517 | 133,233 | ||||
| Depreciation for 2016 | 133,233 | 28,550 | 104,683 | ||||
| Depreciation for 2017 | 104,683 | 28,550 | 76,133 | ||||
| Depreciation for 2018 | 76,133 | 28,550 | 47,583 | ||||
| Depreciation for 2019 | 47,583 | 28,550 | 19,033 | ||||
| Depreciation from 1st January 2020 to 30th August 2020 (8 Months) | 19,033 | 19,033.33 | - | ||||
| Total | 142,750.00 | ||||||
| Depreciation schedule for Building under written down value method | |||||||
| Particulars | Opening value of asset | Depreciation** | Closing value of asset | Remarks | |||
| Depreciation from 1st June 2015 to 31 December 2015 (7 Months) | 120,100 | 17,515 | 102,585 | =120,000*25%= 30,025/12 months* 7 months | |||
| Depreciation for 2016 | 102,585 | 25,646 | 76,939 | ||||
| Depreciation for 2017 | 76,939 |
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