Welders Ltd commenced trading on 1 Jan 20x5 and bought the following assets: • Business premises €100,000 which comprised of land worth €55,000 and a building worth €45,000. The land would not be depreciated, and the building would be depreciated on a straight-line basis overits useful life of 15 years with a nil residual value • 2 Welding machines for €20,000 each. Each had an estimated life of five years and a residual value of €5,000. Onl Jan 20x7, the area around the factory was rezoned and the business premises was revalued to €250,000, comprising Land €175,000 and Building €75,000. The useful life of the building was reduced to 10 years with a nil residual value. On 30 Jun 20x7, one of the welding machines was sold for €15,000 cash. The policy of the company is to charge a full year's depreciation in the year of acquisition and rone in the year of disposal. Required: Prepare the relevant ledger accounts for the year ended 31 Dec 20X7 to reflect the above transactions, assuming the company chooses not to trasfer excess depreciation against the revaluation surplus.
Welders Ltd commenced trading on 1 Jan 20x5 and bought the following assets: • Business premises €100,000 which comprised of land worth €55,000 and a building worth €45,000. The land would not be depreciated, and the building would be depreciated on a straight-line basis overits useful life of 15 years with a nil residual value • 2 Welding machines for €20,000 each. Each had an estimated life of five years and a residual value of €5,000. Onl Jan 20x7, the area around the factory was rezoned and the business premises was revalued to €250,000, comprising Land €175,000 and Building €75,000. The useful life of the building was reduced to 10 years with a nil residual value. On 30 Jun 20x7, one of the welding machines was sold for €15,000 cash. The policy of the company is to charge a full year's depreciation in the year of acquisition and rone in the year of disposal. Required: Prepare the relevant ledger accounts for the year ended 31 Dec 20X7 to reflect the above transactions, assuming the company chooses not to trasfer excess depreciation against the revaluation surplus.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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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.
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