Imran Limited imported technicalmachinery costing Rs. 300,000 on July 01, 2003.
ID: 2457524 • Letter: I
Question
Imran Limited imported technicalmachinery costing Rs. 300,000 on July 01, 2003. It further incurredthe following expenses on the machinery:
Import duty Rs. 100,000
Non-refundable taxes Rs. 5,000
Transportation cost Rs. 6,000 tobring the machinery to factory premises
Insurance in transit Rs. 4,000
Initially the useful life wasestimated to be five years and depreciation was provided onstraight-line basis. The estimated break up value was Rs.15,000.
During the year 2004-05 the companyestimated the remaining life of the machinery to be five yearsinstead of four years. The break up value was re-estimated at Rs.20,000.
The machinery was sold on July 01,2006 for Rs. 280,000
Answer:
Required:
1. Calculate the cost ofmachinery
2. Calculate the depreciation rate(Initial and Revised)
3. Calculate the depreciable amountof machinery at initial stage
4. Calculate the depreciation expenseof machinery for the year ended June 30, 2004
5. Calculate the book value ofmachinery for the year ended June
30, 2004
6. Calculate the depreciation expenseof machinery for the year ended June 30, 2005
Explanation / Answer
1. Cost of machinery Cost 300,000 Duty 100,000 Transport 6,000 Taxes 5,000 Transit ins. 4,000 Cost 415,000 2. Depreciation rate Applying initially 5 yrs and then 4 yrs as you said. Initial depreciation rate 415,000-15,000 5 = 80,000 / yr 80 *100 400 = 20 % Revised Rate 415,000-80,000-20,000 4 78,750 78,750 * 100 315,000 25% 3. Depreciable amount.at initial stage Asset value - Residual 415,000-15,000 =400,000 4.Depreciation expense for year ended june 30,2004 415,000-15,000 5 = 80,000 5.Book value on June 2004 415,000-80,000 = 335,000 6. 415,000 -80,000-20,000 4 =78,750