Financial Accounting-II(Mgt-401) Assignment-1 Spring Semester 2009 Total Marks:

Question

Financial Accounting-II(Mgt-401)
Assignment-1
Spring Semester 2009

            Total Marks: 10

Please read the following instructions carefully beforeattempting
the Assignment:

Last date for submission of Assignment is 31/03/2009
You must go through, thoroughly lectures 01-10 for thisAssignment.
Read the question carefully and answer every point, you arerequired
to explain.
Give the answer according to question, no mark will be givenfor
irrelevant material.
Don’t rely on handouts only, use other reference booksalso.
Make sure that you upload the Assignment before duedate. No
assignment will be accepted through E-mail.
Cheating or copying of assignment is strictly prohibited; Nocredit will
be given to copied assignment.
Once you upload the assignment on LMS, it will not bereplaced under
any condition
Compose your document in MS-Office 2003. Any file created inany
other version will not be accepted and marked zero.


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PROBLEM:
Imran Limited imported technical machinery costing Rs. 300,000 onJuly
01, 2003. It further incurred the following expenses on themachinery:
Import duty Rs. 100,000
Non-refundable taxes Rs. 5,000
Transportation cost Rs. 6,000 to bring the machineryto factory
premises
Insurance in transit Rs. 4,000

Initially the useful life was estimated to be five years anddepreciation
was provided on straight-line basis. The estimated break up valuewas
Rs. 15,000.

During the year 2004-05 the company estimated the remaining life ofthe
machinery to be five years instead of four years. The break upvalue was
re-estimated at Rs. 20,000.

The machinery was sold on July 01, 2006 for Rs. 280,000

Required:
1. Calculate the cost of machinery
2. Calculate the depreciation rate ( Initial and Revised)
3. Calculate the depreciable amount of machinery at initialstage
4. Calculate the depreciation expense of machinery for theyear
ended June 30, 2004
5. Calculate the book value of machinery for the year endedJune
30, 2004
6. Calculate the depreciation expense of machinery for theyear
ended June 30, 2005

Explanation / Answer

1. Cost of machinery      Cost   300,000      Duty      100,000 Transport         6,000 Taxes              5,000 Transit ins.       4,000 Cost           415,000 2. Depreciation rate Initial depreciation rate 415,000-15,000         5 = 80,000 / yr 80 *100              400 = 20 % Revised Rate 415,000-80,000-20,000            4 78,750 78,750    * 100 315,000 25% 3. Depreciable amount.at initial stage Asset value - Residual 415,000-15,000 =400,000 4.Depreciation expense for year ended june 30,2004 415,000-15,000            5 = 80,000 5.Book value on June 2004 415,000-80,000 = 335,000 6. 415,000 -80,000-20,000          4 =78,750

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