-
Solution
Fixed installment or straight line method depreciates cost evenly throughout the useful life of the fixed asset.
Straight line depreciation is calculated as follows:
Depreciation per annum = (Cost – Residual Value) / Useful Life
Where:
Cost includes the initial and any subsequent capital expenditure.
Residual Value is the estimated scrap value at the end of the useful life of the asset. As the residual value is expected to be recovered at the end of an asset’s useful life, there is no need to charge the portion of cost equaling the residual value.
Useful Life is the estimated time period an asset is expected to be used from the time it is available for use to the time of its disposal or termination of use.
Here Cost of the asset = Rs. 1,26,000
Salvage value = Rs. 6,000
Depreciation/year = (1,26,000 – 6,000)/6 = Rs. 20,000
Suresh of Delhi consigned 600 fans to Naresh of Agra to be sold on his account and at his risk. The cost of each fan is Rs. 300. Suresh paid Rs. 6000 as freight and insurance Naresh paid Rs. 1500 as octroi and cartage. Rs. 2000 as rent; and Rs. 1500 as insurance. 500 fans
were sold by Naresh for Rs. 1,80,000 Naresh was entitled to a commission of 4% on sale @ Rs. 350 per fan and 20% of any surplus price realized. Consignment profit will be
-
Solution
-
Solution
The goods are consigned from one place to another. After receiving the goods by consignee, the goods are stored by the consignee before selling them to customers. It is natural that some loss to the goods may take place within that period. The goods may be lost, destroyed or damaged either in transit or in consignee’s store. The loss which could be avoided by proper planning and care are abnormal loss. They are like theft, riots, accidents, fire, earthquake etc. These losses could occur in transit or in consignee’s store and solely to be borne by consignor.
The abnormal loss should be adjusted before ascertaining the result of the consignment. The valuation of abnormal loss is done on the same basis as the unsold stock is valued.
Here Sharma of Allahabad sends goods costing Rs. 1,00,000 at an invoice price of the Rs. 1,20,000 to Kalapil of Katak.
Sharma incurs some expenditure in relation to such consignment:
1/10th of the consignment is damaged in transit.
The cost of the consignment = 100000 + 5000 + 10000 + 5000 = 120000
The amount of loss = 1/10 of 120000 = Rs. 12,000.
A owed Rs. 25,000 to B. A became insolvent and B got A’s computer valuing Rs. 11,500 in full settlement. Journal entry will be passed in the books of ‘B’ will be
-
Solution
Journal entry will be to debit computer by 11,500, bad debts by Rs. 13,500 (25,000 – 11,500) by giving corresponding credit to A.