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# MGT101 Assignment No 2 Solution & Discussion Due Date:29-12-2011

Ittehad Silk Factory is engaged in the production of silk fabric of different types. Mr. Sultan
Ghani, one of the directors, bought latest embroidery machines for its newly established
embroidery unit for Rs. 2,450,000/- on 1st January 2011. The company depreciates
machinery @10% p.a. The machinery will be disposed off at the end of 5th year at Rs.
1,280,000/-. The accounts are closed on 31st December each year.

Required:
1. Prepare the Fixed Asset Schedule regarding machinery showing the columns
of Years, Cost, Depreciation charges, Accumulated depreciation and Written
down value for five years using the following methods separately:
a) Straight line method
b) Diminishing balance method
2. Calculate the profit or loss on the disposal of machinery under:
a) Straight line method
b) Diminishing balance method

a) Straight line method Calculations 10 Marks
b) Diminishing balance method 10 Marks
c) Calculation of Profit/Loss using a & b 3 +3 Marks
d) Formatting (Use of proper tables and titles) 4 Marks

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### Replies to This Discussion

a) Straight line method

Cost = Rs.2450000

Residual value=1280000

Expected life= 5 years

Depreciation = (2450000-1280000)/5

= 234000

 Particular Depreciation Written down value Depreciation cost 1170000 Dep. of 1st year 234000 936000 Dep. of 2nd year 234000 702000 Dep. of 3rd year 234000 468000 Dep. of 4th year 234000 234000 Dep. of 5th year 234000 0

Book value= 0

Sale prize = 1280000

Profit  =  (1280000 - 0)

= 1280000

B) Diminishing Balance Method

b)      Diminishing balance method

 Particular Deprecation (Rs.) Accumulated Depreciation (Rs.) Written down value (Rs.) Deprecation cost 2,450,000 Dep. Of 1st year 2,450,000 * 10% 2,450,00 2,450,00 2,216,000 Dep. Of 2nd year 2216000 * 10% 2,205,00 4,655,00 1,984,500 Dep. Of  3rd year 1984500 * 10% 1,984,50 6,639,50 1,786,050 Dep. Of 4th  year 1786050 * 10% 1,786,05 8,425,55 1,607,445 Dep. Of  5th year 1607445 * 10% 1,607,445 1,003,299.5 1,446,700.5

Book value= 1,446,700.5

Sale prize = 1280000

loss =  1,446,700.5- 1280000

=166700.5

this solution is 100% true.

We are very much confused between Mr. Tariq and Ash.

Yup Plz tell ..which one is true soution......

see 113 page

thnx

Assignment+Solution+2+MGT101

Attachments:

Assignment No 01 Solution

MC110200964

Cost of Machine                                   = 2,450,000.00

Rate of Depreciation                             = 10% p.a

Disposed off after 5 years                     = 1,280,000.00

Q No. 1

Straight Line Method

 Particulars Depreciation (Rs) Written Down Value (Rs) Depreciable Cost - 2,450,000 Depreciation of 1st Year 245000 2205000 Depreciation of 2nd Year 245000 1960000 Depreciation of 3rd Year 245000 1715000 Depreciation of 4th Year 245000 1470000 Depreciation of 5th Year 245000 1225000

Diminishing Balance Method

 Particulars Depreciation (Rs) Accumulated Depreciation (Rs) Written Down Value (Rs) Depreciable Cost - - 2,450,000 Depreciation of 1st Year 245000 245000 2205000 Depreciation of 2nd Year 220500 465500 1984500 Depreciation of 3rd Year 198450 663950 1786050 Depreciation of 4th Year 178605 842555 1607445 Depreciation of 5th Year 160745 1003300 1446700

Q No. 2

A)        Profit or Loss under Straight Line Method

Disposed off Machine Value after 5 years                     = 1,280,000.00

Written Down Value                                                     = 1225000

Profit                                                                            = 55000 Rs

B)        Profit or Loss under Diminishing Balance Method

Disposed off Machine Value after 5 years                     = 1,280,000.00

Written Down Value                                                     = 1446700

Loss                                                                             = 166700 Rs

a)      Straight line method

Cost of machine = 2,450,000

Depreciation rate = 10% p.a

Expected Life = 5 years

10% of 2,450,000 = 245000

Disposal Value (Residual Value) = 1,280,000

Ash you have written wrong WD values.

Here, is one may be it works.

Attachments:

mr navid ap baqi sab ka b Q galat karwa rahe ho mera solution thk hai agar ap ko problem ho rai hai to page no 113 pay daikh lain.WDV thk hain

thanks ash for the correct answer

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