Question 2A: - On January 3, 2014, a machine was bought. The cost price of it was Rs. 42, 000, estimated residual value was Rs. 6, 000 and estimated useful life was 4 years. The company uses Sum of the Year Digit method, and fiscal year is from January to December. Instructions: - Prepare the depreciation schedule. Give the adjusting entry to record depreciation expense for the year 2015. Prepare the income statement extract for the year ended December 31, 2016. Prepare the statement of financial position extract as at December 31, 2017
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Question 2A: - On January 3, 2014, a machine was bought. The cost price of it was Rs. 42, 000, estimated residual value was Rs. 6, 000 and estimated useful life was 4 years. The company uses Sum of the Year Digit method, and fiscal year is from January to December.
Instructions: -
- Prepare the
depreciation schedule. - Give the
adjusting entry to record depreciation expense for the year 2015. - Prepare the income statement extract for the year ended December 31, 2016.
- Prepare the
statement of financial position extract as at December 31, 2017
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