John purchased an equipment for BHD 25,000 on 1 January 2013, it had an estimated useful life
Question:
John purchased an equipment for BHD 25,000 on 1 January 2013, it had an estimated useful life of
5 years, and it was depreciated using reducing balance method at a rate of 20% and residual value of BHD 1,000. On 1 January 2015 it was justifiably decided to change the depreciation method from reducing balance to straight line method.
Required:
A - Calculate the depreciation charge and accumulated depreciation for the equipment over its useful life in the table below
Year | Calculation | Depreciation Charge | Accumulated depreciation |
BHD | BHD | ||
2016 | |||
2017 | |||
2018 | |||
2019 | |||
2020 |
B - Describe the conditions that give rise to "excess depreciation" and the related accounting treatment.
C- Calculate the profit/(loss) if the business decides to sell the equipment after 2 years of purchase for BHD 20,000.
Interpreting and Analyzing Financial Statements
ISBN: 978-0132746243
6th edition
Authors: Karen P. Schoenebeck, Mark P. Holtzman