In early July 2013 Admirable Ltd is considering the acquisition of some machinery for $1200 000 plus
Question:
The following projections were made in order to select a depreciation method to be used for the machinery: Year ended 30June
In calculating the profit before depreciation, all expenses have been deducted, including the repairs and maintenance expense.
Required
a. As the accountant for Admirable Ltd, prepare separate depredation schedules for the machinery for the 5-year period, using the following depreciation methods: (a) straight-line, (b) diminishing balance, (c) sum-of-years-digits, and (d) units-of-production. Use the following headings for each schedule: 'Year ending 30 June', 'Annual depreciation expense', 'Accumulated depreciation', 'Carrying amount at end of year'.
b. Prepare a report for management, stating the advantages and disadvantages of each depreciation method. Include in the report your recommendations on the choice of method consistent with the requirements of IAS 16/AASB 116. Support your recommendations with schedules showing the total annual cost of operating the machinery, and the profit after depreciation.
Step by Step Answer:
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett