Course Content
New Accounting Model (Exam-2009)
Books references: 1. Account Code (Volume III). 2. Chart of Accounts (Issued by CGA). 3. Manual Accounting Principles. 4. Accounting Policies and Procedures Manual.
0/5
Private: DAO Part-I Examination 2024 (Fresh Candidates) Past Papers
About Lesson
Q.6.
M/S. Mateen Engineering Ltd. Bought machinery on 1″ January, 2005 for Rs.260000/-.
It incurred transportation and installation expenses of Rs.20000/- in connection with the machinery.
Mateen Ltd. expects the useful life of the assets to be 6 years.
The estimated realizable value after 6 years is expected to be Rs.10000/-.
Calculate the depreciation for six years.
Answer:

calculate the depreciation for the machinery over a period of six years.

Given information:

  • Cost of machinery: Rs.260,000
  • Transportation and installation expenses: Rs.20,000
  • Useful life of the asset: 6 years
  • Estimated realizable value after 6 years: Rs.10,000

To calculate depreciation, we’ll use the Straight Line Method (SLM):

  1. Determine the total cost of the machinery:

    • Cost of machinery + Transportation and installation expenses = Rs.260,000 + Rs.20,000 = Rs.280,000
  2. Calculate annual depreciation:

    • Annual depreciation = (Cost of machinery – Estimated realizable value) / Useful life
    • Annual depreciation = (Rs.280,000 – Rs.10,000) / 6
    • Annual depreciation = Rs.270,000 / 6
    • Annual depreciation = Rs.45,000
  3. Depreciation for six years:

    • Total depreciation = Annual depreciation × Number of years
    • Total depreciation = Rs.45,000 × 6
    • Total depreciation = Rs.270,000

Therefore, the total depreciation for the machinery over six years is Rs.270,000.

Now we organize the depreciation calculations in a tabulated format:

Item Amount (Rs.)
Cost of machinery 260,000
Transportation and installation expenses 20,000
Total cost of machinery 280,000
Estimated realizable value after 6 years 10,000
Useful life of the asset 6 years
Annual depreciation 45,000
Total depreciation for 6 years 270,000

Join the conversation