Question 1: On January 02, 2009, Atlas Business bought a machine for Rs. 50, 000, on credit terms of 2/10, n/30. The payment was paid within the discount period. Freight in charges was Rs.4, 000 and installation and testing charges were Rs. 2, 000. It was estimated that the useful life will be 5 years and the residual value will be Rs. 7, 000. Full year convention was used in the year of purchase.Instructions: - Compute the cost price of the machine and give the journal entry to record the acquisition of machine.Use all the following three methods to prepare the depreciation schedule Straight Line MethodSum-of-the-Year-Digit MethodGive the adjusting entries to record depreciation and prepare the financial statement extracts as following:Straight Line Method for the years 2009 and 2010, andSum-of-the-Year-Digit Method for the years 2012 and 2013.

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Answered: Question 1: On January 02, 2009, Atlas…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question 1: On January 02, 2009, Atlas Business bought a machine for Rs. 50, 000, on credit terms of 2/10, n/30. The payment was paid within the discount period. Freight in charges was Rs.4, 000 and installation and testing charges were Rs. 2, 000. It was estimated that the useful life will be 5 years and the residual value will be Rs. 7, 000. Full year convention was used in the year of purchase.

Instructions: -

Compute the cost price of the machine and give the journal entry to record the acquisition of machine.

Use all the following three methods to prepare the depreciation schedule

Straight Line Method
Sum-of-the-Year-Digit Method

Give the adjusting entries to record depreciation and prepare the financial statement extracts as following:

Straight Line Method for the years 2009 and 2010, and

Sum-of-the-Year-Digit Method for the years 2012 and 2013.

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