Answers to Question no: 2

ABC & Co. is installing a new Machine at its factory. It has incurred the following costs:

1. Cost of the Machine Tk. 250,000.

2. Freight cost Tk. 50,000.

3. Import duty Tk. 15,000.

4. Paid Advance Income Tax Tk. 5,000.

5. VAT Paid Tk. 37,500.

6. Packaging cost Tk. 10,000.

7. Port penalty Tk. 10,000.

8. Cost of site preparation Tk. 60,000.

A) Requirement:

Find out the costs to be capitalized as Machine A/C?

Consider the following information for the calculation of depreciation expense for the above machine:

The above machine has been recorded as an asset on 01 January 2017. The useful life of the machine would be 10 years. The depreciation method is straight line method and the residual value of the machine is Tk. 50,000.

B) Requirement:

Calculate the depreciation expenses of the Machine for the year 2017 and give the necessary journal entry to record the depreciation expense as of 31 December 2017.