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ASSIGNMENT: PRINCIPLES OF ACCOUNTING

INSTRUCTOR :RAIS AHMED

STUDENT NAME : TALHA AHMED

STUDENT ID : 1765-2020

ANSWER:01

COMPUTATION OF THE COST OF EQUIPMENT

LIST PRICE 204000
LESS: 2% CASH DISCOUNT 4080 204000 X 2%
NEGOTIATED PRICE 199920
ADD: 7% SALES TAX 13994.4 199920 X 7%
213914.4
OTHER EXPENSES
FREIGHT 2596
LABOR (for installing equipment) 4210
INSURANCE IN TRANSIT 1800
8606
COST OF ASSET 222520.4

ANSWER:02

INFORMATION NEEDED FOR CALCULATION DEPRECIATION

COST OF ASSET 50,000
SALVAGE VALUE 5,000
ST
DATE OF PURCHASE 1 JAN 1998
LIFE IN YEARS 5
YEAR ENDS ON DEC 31 EACH YEAR
REQUIRED:
COMPUTE AND RECORD DEP FOR 2 YEARS

STRAIGHT LINE METHOD

FORMULA
COST - SALVAGE VALUE = DEPRECIATION PER YEAR
LIFE IN YEARS
50,000 - 5,000 9,000 PER YEAR
5
DEP.EXP ACC.DEP

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DEP FOR 1998 9,000 9,000

DEP FOR 1999 9,000 18,000
DEP FOR 2000 9,000 27,000
DEP FOR 2001 9,000 36,000
DEP FOR 2002 9,000 45,000

31/12/98 DEPRECIATION EXP 9,000

ACCUMULATED DEPRECIATION
9,000
31/12/99 DEPRECIATION EXP 9,000
ACCUMULATED DEPRECIATION
9,000
PARTIAL BALANCE SHEET
AS ON 31.12.1999
COMPUTER 50,000
LESS: ACCUMULATED DEPRECIATION (18,000)
32,000

REDUCING BALANCE METHOD

COST OF ASSET 50,000
SALVAGE VALUE 5,000
LIFE IN YEARS 5
DATE OF PURCHASE 1ST JAN 1998
YEAR ENDS ON 31ST DEC EACH YEAR
METHOD REDUCING
RATE OF DEPRECIATION 40.00%
FORMULA = BOOK VALUE X RATE

DEP EXP ACC DEP

Y-1 (1.01.98 – 31.12.98)
50,000 X 40% = 20,000 20,000
Y-2 (1.01.99 – 31.12.99)
(50,000 - 20,000) = 30,000 X 40% 12,000 32,000

DEPRECIATION TABLE
YR BV(BEG) RATE DEP EXP ACC.DEP BV(END)
1 50,000 40% 20,000 20,000 30,000
2 30,000 40% 12,000 32,000 18,000
3 18,000 40% 7,200 39,200 10,800
4 10,800 40% 4,320 43,520 6,480
5 6,480 40% 1,480 45,000 5,000

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SUM OF THE YEAR DIGIT METHOD

COST OF ASSET 50,000
SALVAGE VALUE 5,000
LIFE IN YEARS 5
DATE OF PURCHASE 1ST JAN 1998
YEAR ENDS ON 31ST DEC EACH YEAR
METHOD SUM OF THE YEAR DIGIT METHOD

FRACTION: N X (N+1)/2 WHERE N = LIFE IN YEARS.

FRACTION: 5 + 4 + 3 + 2 + 1 15

FORMULA = (COST - SV) X FRACTION DEP EXP ACC DEP

YR-1 (50,000 - 5,000) X 5/15 = 15,000 15,000
YR-2 (50,000 - 5,000) X 4/15 = 12,000 27,000
YR-3 (50,000 - 5,000) X 3/15 = 9,000 36,000
YR-4 (50,000 - 5,000) X 2/15 = 6,000 42,000
YR-5 (50,000 - 5,000) X 1/15 = 3,000 45,000

ANSWER : 03

WORKING HOURS METHOD

COST OF ASSET 155,000
SALVAGE VALUE 5,000
DATE OF PURCHASE 1ST JULY 1998
LIFE IN HOURS 100,000
YEAR ENDS ON 31ST DEC EACH YEAR
REQUIRED:
COMPUTE DEPRECIABLE COST DEPRECIABLE COST = COST -
COMPUTE AND RECORD DEP FOR 2 YEARS DEPRECIABLE COST = 155,000
Y-1 ACTUAL HOURS WORKED 20,000 DEPRECIABLE COST = 150,000
Y-2 ACTUAL HOURS WORKED 25,000

FORMULA
COST - SALVAGE VALUE = DEPRECIATION PER HOURS
LIFE IN HOURS
155,000 - 5,000 1.50 PER HOUR
100,000
DEP FOR 1998 = 20,000 X 1.50 = 30,000
DEP FOR 1999 = 25,000 X 1.50 = 37,500

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31/12/98 DEPRECIATION EXP 30,000

ACCUMULATED DEPRECIATION

31/12/99 DEPRECIATION EXP 37,500

ACCUMULATED DEPRECIATION

PRODUCTION / UNIT OUTPUT METHOD

COST OF ASSET 155,000
SALVAGE VALUE 5,000
DATE OF PURCHASE 1ST JULY 1998
LIFE IN UNITS 200,000 UNITS
YEAR ENDS ON DEC 31 EACH YEAR
REQUIRED:
COMPUTE DEPRECIABLE COST DEPRECIABLE COST = COST -
COMPUTE AND RECORD DEP FOR 2 YEARS
Y-1 ACTUAL PRODUCTION IS 50,000 UNITS DEPRECIABLE COST = 155,000
Y-2 ACTUAL PRODUCTION IS 60,000 UNITS DEPRECIABLE COST = 150,000

FORMULA
COST - SALVAGE VALUE = DEPRECIATION PER UNIT
LIFE IN UNITS
155,000 - 5,000 0.75 PER UNIT
200,000
DEP FOR 1998 = 50,000 X 0.75 = 37,500
DEP FOR 1999 = 60,000 X 0.75 = 45,000

31/12/98 DEPRECIATION EXP 37,500

ACCUMULATED DEPRECIATION

31/12/99 DEPRECIATION EXP 45,000

ACCUMULATED DEPRECIATION

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04000 X 2%

99920 X 7%

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ACCUMULATED DEP
31.12.98 9,000
31.12.99 9,000

IF RATE IS NOT GIVEN THEN:

100 / LIFE X 2
100/5 X 2 = 40%
IF LIFE IS 10 YEARS THEN
100/10*2 = 20%
BOOK VALUE/WRITTEN DOWN VALUE (WDV)

IT MUST BE EQUAL TO SALVAGE VALUE

5000 – 3888 = 1,112

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T METHOD

5 x (5+1)/2
15

DEPRECIABLE COST = COST - SALVAGE VALUE

DEPRECIABLE COST = 155,000 - 5,000
DEPRECIABLE COST = 150,000

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30,000

37,500

DEPRECIABLE COST = COST - SALVAGE VALUE

DEPRECIABLE COST = 155,000 - 5,000

DEPRECIABLE COST = 150,000

37,500

45,000

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