6. A company acquired seven identical equipment for GHC147m on January 1st Year 1, with an estimated useful life of 5 years and a salvage value of GHC1m each. One of the equipment had been disposed of on January 3rd Year 3 for GHC12m. Required: Prepare the Asset A/c, the Provision for Depreciation A/c, the Asset Disposal A/c (to determine the gain or loss) for the relevant years.
6. A company acquired seven identical equipment for GHC147m on January 1st Year 1, with an estimated useful life of 5 years and a salvage value of GHC1m each. One of the equipment had been disposed of on January 3rd Year 3 for GHC12m. Required: Prepare the Asset A/c, the Provision for Depreciation A/c, the Asset Disposal A/c (to determine the gain or loss) for the relevant years.
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:6. A company acquired seven identical equipment for GHC147m on January 1st Year
1, with an estimated useful life of 5 years and a salvage value of GHC1m each. One
of the equipment had been disposed of on January 3rd Year 3 for GHC12m.
Required: Prepare the Asset A/c, the Provision for Depreciation A/c, the Asset
Disposal A/c (to determine the gain or loss) for the relevant years.
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