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1. Tangible Assets:
2. Intangible Assets:
The term intangible is used to describe assets that are used in operation of
the business, but have no physical substance and are noncurrent. Examples
include Patents, Goodwill Copyrights and Trademarks.
3. Natural Resources:
The cost of the plant asset includes all expenditures that are reasonable and
necessary for getting asset to the desired location and ready for use. For
example Sales tax on the purchase price, transportation charges, insurance
in transit and installation charges.
Add:
Depreciation:
Book Value:
Plants are shown in the balance sheet at their book values. The book
value of a plant asset is its cost minus the related accumulated
depreciation. Accumulated depreciation is a contra asset account
representing that portion of the asset’s cost that has already been
allocated to expense.
Cost xxx
1. Cost:
The cost of the plant asset includes all expenditures that are reasonable and
necessary for getting asset to the desired location and ready for use.
2. Salvage Value:
Salvage Value is a residual value or scrap value, is an estimate of the asset’s
value at the end of its benefit period.
3. Useful Life:
The useful life of a plant asset is the length of time it is productively used
in a company’s operation. Useful life is also called service life might not be
as long as the asset’s total productive life.
Straight line charges the same amount of expense to each period of the
asset’s useful life.
Under this method, the amount of the depreciation to be written off each
year is calculated by the formula:
x depreciable cost of the asset
Required:
i) Straight Line
ii) Diminishing Balance
iii) Sum of Year Digits
Q: On January 1st 2008, Apex Co. bought five machines at a list price of
Rs.40,000 each with a trade discount of 5%. The terms of payment 2/10,
n/30.The Co. made the payment within discount period. Additional expense
incurred and paid in cash were
2. Paid interest on the money borrowed from the bank for the purchase of
machine Rs.200
6. Some parts damaged during installation and get repaired for Rs.4,300
It is estimated that these Machines will have a useful life of 15 years with a
salvage value of Rs.10,700.
Required:
Calculate the Cost and Depreciation charged for the years 2008 and 2009
under each of the following method separately:
i) Straight Line
ii) Diminishing Balance
iii) Sum of Year Digits