A company purchased a machine for ₹500000( including boiler worth ₹100000) .The company provides depreciation @10% as per straight line method. After four years the boiler becomes useless and it was discarded for ₹20000. Prepare machine A/C for four years.
Please give complete solution also.
Answers
Answer:
Purchase Price of machine = 20,00,000
Installation charges = 5,00,000
Total cost of machine = 25,00,000
Depreciation = 25,00,000*10/100
= 2,50,000.
Answer: The machine's ultimate book value after four years is $131,000 (i.e., the machine's original cost of $500,000 less the entire amount of depreciation of $200,000 less the value of the boiler that was discarded, which was worth $20,000).
Explanation:
We must compute the yearly depreciation and the book value of the machine at the conclusion of each year in order to compile the Machine Account for four years. Here's how to accomplish it:
Year 1: The machine cost $550,000.
Depreciation equals $50,000 (10% of $500,000)
Cost less depreciation equals $450,000 in book value at the end of year 1.
Year 2: The machine's cost was $500,000
Depreciation equals $50,000 (10% of $500,000)
The difference between the book value at the end of year 1 and year 2 is $400,000
Year 3: The machine's cost was $500,000
Depreciation equals $50,000 (10% of $500,000)
Depreciation subtracted from the book value at the conclusion of the third year results in a value of $350,000.
Year 4: The machine cost 500,000 dollars.
Depreciation equals $50,000 (10% of $500,000)
After subtracting depreciation, the book value at the end of year four is equal to $300,000.
Now when the boiler is discarded for 20,000 after four years, we must take its value out of the Machine Account. The last Machine Account is as follows:
Account Machine
Price Depreciation Book Value Year
1 500000 50000 450000
2 500000 50000 400000
3 500000 50000 350000\s4 500000 50000 300000
We must compute the yearly depreciation and the book value of the machine at the conclusion of each year in order to compile the Machine Account for four years. Here's how to accomplish it:
Year 1: The machine cost $550,000.
Depreciation equals $50,000 (10% of $500,000)
Cost less depreciation equals $450,000 in book value at the end of year 1.
Year 2: The machine's cost was $500,000
Depreciation equals $50,000 (10% of $500,000)
The difference between the book value at the end of year 1 and year 2 is $400,000
Year 3: The machine's cost was $500,000
Depreciation equals $50,000 (10% of $500,000)
Depreciation subtracted from the book value at the conclusion of the third year results in a value of $350,000.
Year 4: The machine cost 500,000 dollars.
Depreciation equals $50,000 (10% of $500,000)
After subtracting depreciation, the book value at the end of year four is equal to $300,000.
Now when the boiler is discarded for 20,000 after four years, we must take its value out of the Machine Account. The last Machine Account is as follows:
Account Machine
Price Depreciation Book Value Year
1 500000 50000 450000
2 500000 50000 400000
3 500000 50000 350000
4 500000 50000 300000
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