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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

Assignment no. 2
MGT101
SOLUTION:
Q: 1
a) Straight line method:
No Residual Value is given so full cost will be depreciated over the useful life.
Years Cost Dep. Charge Acc. Depreciation N.P.V
Year 1 2450000 490000 490000 1960000
Year 2 2450000 490000 980000 1470000
Year 3 2450000 490000 1470000 980000
Year 4 2450000 490000 1960000 490000
Year 5 2450000 490000 2450000 0
Total 2450000 2450000 2450000 0

b) Diminishing balance method:

Years Cost Dep. Charge
@ 10% Acc. Dep. N.P.V
Year 1 2450000 245000 245000 2205000
Year 2 2450000 220500 465500 1984500
Year 3 2450000 198450 663950 1786050
Year 4 2450000 178605 842555 1607445
Year 5 2450000 160745 1003300 1446700
Total 2450000 1003300 1003300 1446700

Q : 2
a) Straight line method
P/L on Disposal of Asset:
P/L = Selling Price – NPV
= 1280000 – 0
PROFIT = 1280000

b) Diminishing balance method:
P/L on Disposal of Asset:
P/L = Selling Price – NPV
= 1280000 – 1446700
LOSS = 166700

Ash .very bad yar ,tm nay hamary itnay marks zahaya karwa diye apnay yakeen kay pichay ..very sad for us now .

i m sorry but handout pay sir nay aik jaga aisay hi Q karwaya tha.main to ap sab ki help karna chahti thi.sorry again

Its ok now ash  .ab kia ho sakta hai . acualy u ryte .question tha b bht confusing ..maira damagh bhi wahin atka tha kay written down value should be zero in straight line method .so i totally acceptd ur method .. i forget about other depreciation . that should also be  same ..anyways it just depend on our thought ...kay hum nay kis sense main question understand kia ..dont be feel sorry more now .....

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