the plant is purchased for 20000 it is depreciated on 5%per annum on reducing balance for 5 years when it become obselete due to new nethod of production and is scarapped. the scrapped produces rs5385 . show the plant and depreciation account. ?
Answers
Answer:
the plant is purchased for 20000 it is depreciated on 5%per annum on reducing balance for 5 years when it become obselete due to new nethod of production and is scarapped. the scrapped produces rs5385 . show the plant and depreciation account. ?
The loss on scrapping of asset is Rs 10090.61875
Given:
Plant price = 20000
Rate of depreciation = 5% per annum
Method of depreciation: reducing balance method
Scrap value = Rs 5385
To find:
The plant Account and depreciation account
Solution:
working notes:
calculation of depreciation of plant:
plant cost = 20000
depreciation for the first year = 20000 * 5% =1000
value of plant after first year = 20000 - 1000 = Rs 19000
depreciation for the second year = Rs 19000 * 5% = 950
value of plant after second year = Rs 19000 - 950 = 18050
depreciation for the Third year = Rs 18050 * 5% = 902.5
value of plant after Third year = Rs 18050 - 902.5 = 17147.5
depreciation for the fourth year = 17147.5 * 5% = 857.375
value of plant after fourth year = 17147.5 - 857.375 = 16290.125
depreciation for the Fifth year = 16290.125 * 5% = 814.50625
value of plant after Fifth year = 16290.125 - 814.50625 = 15475.61875
calculation of Loss on sale of asset:
value of plant after Fifth year = 15475.61875
the scrapped produces Rs 5385
so, the loss on scrapping of asset = 15475.61875 - 5385 =
Rs 10090.61875
refer to the attachments for depreciation account and plant account.
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