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MGT101 - Financial Accounting Assignment No. 02 Solution and Discussion Spring 2013 Due Date Jun 19, 2013

 

A company, whose accounting year is calendar year, purchased machinery inclusive of installation charges amounting to Rs. 250,000 on 1st January 2008.

On 1

st October 2012, the machinery has become obsolete and is sold for Rs. 60,140.

Company charged the deprecation @20% per annum on plant and machinery. It is the policy of the company to charge the deprecation of all fixed assets on the basis of use under diminishing balance method.

Required:

1. Prepare depreciation schedule for five years showing the four columns i.e. Years, Depreciation expense, Accumulated depreciation and Book value.

2. Calculate the profit or loss on disposal of machinery.

QUESTION-02

Required:

Based on the above information, you are required to calculate the following for the period ended on 31

st December 2012:

1. Net sales

2. Gross purchases

3. Administration expenses

4. Financial expenses

5. Current assets

6. Current liabilities

Following information is available of a business concern for the year of 2012.

Items

Rs.

Gross sales

900,000

Return inwards

50,000

Return outwards

40,000

Net purchases

950,000

Gross loss

200,000

Advertising expenses

200,000

Distribution expenses

100,000

Salaries of clerical staff

300,000

Office rent

250,000

Bank charges

50,000

Long term loan taken from bank on 1

st January @ 12% per annum

500,000

Cash

90,000

Accounts receivable

60,000

Plant and machinery

300,000

Building

900,000

Accounts payable

35,000

Short term borrowings

25,000

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SEMESTER SPRING 2013

FINANCIAL ACCOUNTING (MGT101)

ASSIGNMENT NO – 02

Asad Azeem (mc130200467)

 

 

QUESTION-1

  • Prepare depreciation schedule for five years showing the four columns i.e. Years, Depreciation expense, Accumulated depreciation and Book value.

Years

Depreciation expense

Accumulated depreciation

Book value.

01-January-2008

250,000

31-December-2008

50,000

50,000

200,000

31-December-2009

40,000

90,000

160,000

31-December-2010

32,000

122,000

128,000

31-December-2011

25,600

147,600

102,400

31-December-2012

15,360

162,960

87,040

 

  • Calculate the profit or loss on disposal of machinery.

 

 

Book value after five years Rs. 87,040

Sale price Rs. 60,140

Profit on sale Rs. 26,900(87,040– 60,140)

 

 

 

 

 

 

 

 

 

 

 

QUESTION-2

  1. 1.      Net sales:

=Sales-Sales Return

=900,000 - 50,000

=850,000

  1. 2.      Gross purchases:

=Net Purchase + Purchase Return

=950,000 + 40,000

=990,000

  1. 3.      Administration expenses:

=Salaries of clerical staff+ Office rent

=300,000 + 250,000

=550,000

  1. 4.      Financial expenses:

= Long term loan taken from bank on 1st January @ 12% per annum + Bank charges

=60,000 + 50,000

=110,000

  1. 5.      Current Assets:

=Cash + Accounts Receivable

=90,000 + 60,000

=150,000

  1. 6.      Current liabilities:

=Loan (Long Term + Short Term) + Accounts Payable

= 465,000(440,000+25,000) +35,000

=500,000

Dear Asad,

 

Question # 1

Depreciation for Last year will be 102,400 x 0.2 = 20,480 and Book Value should be 81,920.

 

How you calculate 15,360??

depreciation is for last year is 102400.

depreciation rate is 20%.

and the requirement is

Company charged the deprecation @20% per annum on plant and machinery. It is the policy of the company to charge the deprecation of all fixed assets on the basis of use under diminishing balance method.

so on last year asset has been sold on 1st October 2012.

which mean asset was not used for the whole year even it sold after the use of 9 months so then deprecation will be calculated in keeping in view the duration of use

102400 * 20% *9/12 = 15360

I hope now u will understand.

Got it....

hmmmm coorrrect:)

Current assets for the balance sheet

Examples of current assets are cash, accounts receivable, and inventory.

  • Cash: Cash includes accounts such as the company’s operating checking account, which the business uses to receive customer payments and pay business expenses, or an imprest account, which keeps a fixed amount of cash in it (such as petty cash).
  • Accounts receivable: This account shows all money customers owe to a business for a completed sales transaction. For example, Business A sells merchandise to Business B with the agreement that B pay for the merchandise within 30 business days.
  • Inventory: Goods available for sale reflect on a merchandiser’s balance sheet in this account. A merchandiser is a retail business, like your neighborhood grocery store, that sells to the general public. For a manufacturing company, a business that makes the items merchandisers sell, this category also includes the raw materials used to make items.
  • Prepaid expenses: Prepaids are any expense the business pays for in advance, such as rent, insurance, office supplies, postage, travel expense, or advances to employees. They also list as current assets, as long as the company envisions receiving the benefit of the prepaid items within 12 months of the balance sheet date.

= Cash+ Accounts receivable+ Inventory+ Prepaid expenses

=90000+60000+250000

AOA

this is realy very good massege 4 all the members of vu

How to Prepare an Income Statement & a Balance Sheet in Financial Accounting


Step 1
Organize the T-accounts by separating income statement accounts from balance sheet accounts.
Step 2
Compile the list of income statement accounts into two types: operating and non-operating.
Step 3
Create the income statement by writing a list of operating revenues and expenses accounts, then subtract operating revenues from operating expense to find operating income. Write a list non-operating revenues and expenses, then subtract non-operating revenues from non-operating expenses to find non-operating income. Add operating income to non-operating income to find the companies net income for the period.
Step 4
Divide the balance sheet accounts into three categories: assets, liabilities and stockholders' equity.
Step 5
Create the balance sheet by first writing a list of the asset accounts in order of liquidity. Write a list of the liability accounts, separated as short-term or long-term. Write a list a stockholders' equity accounts. After listing all the accounts, the amount of assets will equal the amount of liabilities plus stockholders' equity.
Q 1 part 2

How do you find profit and loss in sell of any machine in depreciation?

To do this, you need to have a couple of figures.
- Cost of the machine
- Accumulated depreciation
- Sell price
- Residual value (how much the machine would be worth after it's fully depreciated, if you are selling at this time)

Imagine:
Machine cost $10000
Accumulated Depreciation $4000
Sold for $15000

Step 1: Record sale of machine

Dr Cash at bank $15 000
Cr Proceeds from sale of machine $15 000
(To record proceeds from sale of machine)

Step 2: Record disposal of machine

Dr Carrying Amount* $6 000
Dr Accumulated depreciation $4 000
Cr Machine $10 000
(To recognise carrying amount as an expense, and a gain of $5 000 on sale of machine)

As you can see, machine's carrying amount was $6 000 and you sold it for $15 000, you have made $9 000 gain.

*Carrying amount = Cost of machine - Accumulated depr
= $10 000 - $4 000
= $6 000
SEMESTER SPRING 2013
FINANCIAL ACCOUNTING (MGT101)
ASSIGNMENT NO – 02
Asad Azeem (mc130200467)

QUESTION-1
• Prepare depreciation schedule for five years showing the four columns i.e. Years, Depreciation expense, Accumulated depreciation and Book value.
Years Depreciation expense Accumulated depreciation Book value.
01-January-2008 250,000
31-December-2008 50,000 50,000 200,000
31-December-2009 40,000 90,000 160,000
31-December-2010 32,000 122,000 128,000
31-December-2011 25,600 147,600 102,400
31-December-2012 15,360 162,960 87,040

• Calculate the profit or loss on disposal of machinery.

Book value after five years Rs. 87,040
Sale price Rs. 60,140
Profit on sale Rs. 26,900(87,040– 60,140)

QUESTION-2
1. Net sales:
=Sales-Sales Return
=900,000 - 50,000
=850,000
2. Gross purchases:
=Net Purchase + Purchase Return
=950,000 + 40,000
=990,000
3. Administration expenses:
=Salaries of clerical staff+ Office rent
=300,000 + 250,000
=550,000
4. Financial expenses:
= Long term loan taken from bank on 1st January @ 12% per annum + Bank charges
=60,000 + 50,000
=110,000
5. Current Assets:
=Cash + Accounts Receivable
=90,000 + 60,000
=150,000
6. Current liabilities:
=Loan (Long Term + Short Term) + Accounts Payable
= 465,000(440,000+25,000) +35,000
=500,000
QUESTION-2
1. Net sales:
=Sales-Sales Return
=900,000 - 50,000
=850,000
2. Gross purchases:
=Net Purchase + Purchase Return
=950,000 + 40,000
=990,000
3. Administration expenses:
=Salaries of clerical staff+ Office rent
=300,000 + 250,000
=550,000
4. Financial expenses:
= Long term loan taken from bank on 1st January @ 12% per annum + Bank charges
=60,000 + 50,000
=110,000
5. Current Assets:
=Cash + Accounts Receivable
=90,000 + 60,000
=150,000

Accounts payable+Short term borrowings

35000+25000 =60000

According to me this is correct answer of question no 2

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