Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q # 1 Distinguish between capital expenditures and revenue expenditures Q # 2 National company acquired a machine on January 01, 2005 at a list

Q # 1

Distinguish between capital expenditures and revenue expenditures

Q # 2

National company acquired a machine on January 01, 2005 at a list price of Rs. 565, 000 with a trade discount of 2%. The terms of payment was 3/10, n/30, including a sales tax of 4%. The Co. availed the concession period of payment. The Co. also incurred the following expenses:

Transportation charges Rs. 15,000

Installation and testing charges Rs. 20,000

Package charges Rs. 5,000

Insurance in transit Rs. 25,000

The company also paid Rs. 3,500 as a fine on account of negligent driving by one of the companys driver while transporting the machinery. During installation work of the machinery, adjacent machinery was damaged and repair cost paid Rs. 9,000. License fee paid for the operation of the machinery Rs. 30,000 for the current year. An amount of Rs. 24,400 was paid as fire insurance premium on a three years policy.

It is estimated that the machinery has a scrap value of Rs. 100,000 at the end of its estimated service life of 8 years. On December 31st, 2009 machine was sold at Rs. 150,000.

Required

  1. Compute the cost and gain or loss on sale of machine.
  2. Prepare journal entries in proper form to record the purchase of machine and disposal of machine

Note: Entries without computation will not be accepted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Ethics

Authors: Ronald F. Duska, Brenda Shay Duska, Kenneth Wm. Kury

3rd Edition

1119118786, 9781119118787

More Books

Students also viewed these Accounting questions

Question

Did you provide headings that offer structure to the information?

Answered: 1 week ago