Salman and Adnan Corporation purchased typesetting equipment having a list price of Rs. 306,000 from a manufacturing in the Z area. Credit terms for the transaction were 2/10, n/30. Salman and Adnan Corporation paid the invoice within the discount period, as well as an additional 7% sales tax on the net price. Other payments relating to the acquisition of the equipment were a freight bill of Rs. 3,894 and a labor cost for installing the equipment of Rs. 6,315. During the installation process, an accident caused damage to the equipment, which was repaired at cost of Rs. 7,500. As soon as the equipment was in place, the company obtained insurance on it for a premium of Rs. 2,700. Required: Compute the Cost of Equipment. Calculate the depreciation for first three years using declining method at twice the normal rate, assume that the machine has 6 years useful life and have an estimated value of Rs. 38,000. At the time of disposal (after 6 years) cash Rs. 45,000 were received from Ahmed & Co. in the terms of equipment’s disposal. Journalize the necessary entries for disposal of machine.
Salman and Adnan Corporation purchased typesetting equipment having a list price of Rs. 306,000 from a manufacturing in the Z area. Credit terms for the transaction were 2/10, n/30. Salman and Adnan Corporation paid the invoice within the discount period, as well as an additional 7% sales tax on the net price. Other payments relating to the acquisition of the equipment were a freight bill of Rs. 3,894 and a labor cost for installing the equipment of Rs. 6,315. During the installation process, an accident caused damage to the equipment, which was repaired at cost of Rs. 7,500. As soon as the equipment was in place, the company obtained insurance on it for a premium of Rs. 2,700. Required: Compute the Cost of Equipment. Calculate the depreciation for first three years using declining method at twice the normal rate, assume that the machine has 6 years useful life and have an estimated value of Rs. 38,000. At the time of disposal (after 6 years) cash Rs. 45,000 were received from Ahmed & Co. in the terms of equipment’s disposal. Journalize the necessary entries for disposal of machine.
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 63P
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Salman and Adnan Corporation purchased typesetting equipment having a list price of Rs. 306,000 from a manufacturing in the Z area. Credit terms for the transaction were 2/10, n/30. Salman and Adnan Corporation paid the invoice within the discount period, as well as an additional 7% sales tax on the net price. Other payments relating to the acquisition of the equipment were a freight bill of Rs. 3,894 and a labor cost for installing the equipment of Rs. 6,315. During the installation process, an accident caused damage to the equipment, which was repaired at cost of Rs. 7,500. As soon as the equipment was in place, the company obtained insurance on it for a premium of Rs. 2,700.
Required:
- Compute the Cost of Equipment.
- Calculate the
depreciation for first three years using declining method at twice the normal rate, assume that the machine has 6 years useful life and have an estimated value of Rs. 38,000. - At the time of disposal (after 6 years) cash Rs. 45,000 were received from Ahmed & Co. in the terms of equipment’s disposal. Journalize the necessary entries for disposal of machine.
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