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  #1  
Old Wednesday, March 09, 2016
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Default Let`solve CE-2016 A&A paper

A.O.A!
kindly check solution of this question (CE-2016 A&A paper I Q NO 4(A))

HERE IS SOLUTION

(a)schedule
Working
To find depreciation rate
Cost (c) =85000
Residual value (s) =10000
Useful life (n) =4years
Rate of depreciation (r) =?
Formula:
Annual depreciation=cost- salvage value =85000-10000 =18750
Estimated life 4

Depreciation rate =annual depreciation×100=18750×100= 25%
Depreciable value 75000

(Depreciable value=cost- salvage value=85000-10000=75000)

As double declining balance depreciation method so
Depreciation Rate = Accelerator × Straight Line Rate
=2 × 25%
=50%

Calculation of depreciation
Depreciation = Depreciation Rate × Book Value of Asset

year Net book value, Double-declining balance Acc dep NBV,
beginning of year depreciation computed end of year
as 2 × SL rate
× beginning NBV

1 85,000 42,500 42,500 42,500
2 42,500 21,250 63,750 21,250
3 21,250 10,625 74,375 10,625
4 10,625 625 625 10,000
salvage value
Total 75,000 75,000




(b) Balance sheet at 31 Dec 2015
Hydri construction co.
Balance sheet
As on 31st December 2015

Liabilities Rs. Assets Rs.

Fixed Assets:

Excavator: 85000
-depreciation 42500 42500
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(C ):ENTRIES

1 jan 2015
Excavator a/c 85,000
Bank a/c 85,000
Being asset is acquired

31Dec,2015
Depreciation a/c 42,500
Excavator a/c 42,500
Being depreciation charged

Profit and loss a/c 42,500
Depreciation a/c 42,500
Being depreciation a/c transferred to Profit and loss a/c

31Dec,2016
Depreciation a/c 21,250
Excavator a/c 21,250
Being depreciation charged

Profit and loss a/c 21,250
Depreciation a/c 21,250
Being depreciation a/c transferred to Profit and loss a/c


31Dec,2017
Depreciation a/c 10,625
Excavator a/c 10,625
Being depreciation charged

Profit and loss a/c 10,625
Depreciation a/c 10,625
Being depreciation a/c transferred to Profit and loss a/c


31Dec,2018
Depreciation a/c 625
Excavator a/c 625
Being depreciation charged

Profit and loss a/c 625
Depreciation a/c 625
Being depreciation a/c transferred to Profit and loss a/c


Bank a/c 10000
Excavator a/c 10000
Being scrap of asset sold
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Old Sunday, March 13, 2016
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A. You have done extra working.
Try to save time by using the following formula:
Depreciation rate = ¼ x 2 = 50%
Secondly, Your schedule is not properly presented, however calculations are correct.

B. Good, correct answer. However, You are supposed to write the Description ‘Accumulated Depreciation’ instead of Depreciation

C. The entries are correct. However, you are supposed to credit Accumulated Depreciation instead of Asset.

Comments: Good effort but you need to work with smartness and proper presentation.
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First of all thank you very much for sparing your precious time to check this solution.

A- I prepared it in organized form on a MS office page with proper table insertion but during copy pasting something went wrong even after posting here I was unable to take its proper understanding anyways hats off to you that you still manage to read hahahaha. But thank you thank you so much.
Ya you are right that it should be like Depreciation rate = ¼ x 2 = 50% actually I try to be sophisticated and presentable with proper formulas (even though I failed badly later) anyways yes you are right that i should work smartly and save time n next time I will do the same.
C-When depreciation is charged
In B.Com books entry is like (Accounting by M Arif & Sohail Afzal)
Depreciation a/c …………..Dr
Asset a/c………………….Cr
In M.com entry is like
Depreciation a/c …………….Dr
Accumulated depreciation …..Cr
At the disposal of asset
Accumulated depreciation …..Dr
Asset a/c ……………………Cr
Any ways next time I will follow latter.
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Smartness saves your time in exam, therefore, you should practice the fastest way to solve. Never depends on books of B.Com or M.Com for any accounting treatment. Always check the relevant International Accounting Standard in case of confusion because IAS is the supreme text. M Arif or Sohail Afzal etc books contain some obsolete material as well because i have seen it while teaching to my B.Com students.
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The depreciation for the last year is recorded as 625. Please explain, why?

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Quote:
Originally Posted by ammadbeaconite View Post
The depreciation for the last year is recorded as 625. Please explain, why?

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That is the only amount leftover to depreciate for the last year.
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Quote:
Originally Posted by Zubair Gilgiti View Post
That is the only amount leftover to depreciate for the last year.
Fine. My first query is that is there any exception to this rule?

What I would have done is as follows:

Depreciating the asset by 5312.5, and then selling for 10000 and reporting a gain of 4687.5. Please explain if the treatment applied by me is correct or not. Thanks

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Quote:
Originally Posted by ammadbeaconite View Post
Fine. My first query is that is there any exception to this rule?

What I would have done is as follows:

Depreciating the asset by 5312.5, and then selling for 10000 and reporting a gain of 4687.5. Please explain if the treatment applied by me is correct or not. Thanks

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Your treatment is absolutely incorrect treatment. The relevant standard IAS-16 or any book does not provide any such treatment.

You can not depreciate an asset more than depreciable amount e.g (Cost - Residual Value)
However, under both options Net impact on profit will remain same.
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Question Aspirants please solve further..

Accounting aspirants please solve other questions as well from2016 paper..

Please reconcile these also...
Q2..Net Income Rs.2410
Balance sheet Re.18610
Retained Earning 1910

Q3b..Adjusting entries total 7 if im not wrong??
Share entry for salaries and rent revenue...

Q4b..ratios in order
2.26
1.01
56days
4.02
1.06
44.37%
7.92%
19.47%

Q5a..net income. .Rs.755,500.
Units manufactd 14300
Unit cost of calculators manufacture 340
Gp/unit..122
Inc/unit...53.20
Ratio of gp to sales..0.26:1
Income to sales %...11.38%

Please correct me where I'm wrong n share your ans to all other questions as well as it wd b v helpful for all of us...
I want to chk mine
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