Q # 3 ABC Trader acquired a machine on Oct. 01, 2007 at a list price of Rs. 400,000 with a trade discount of 5%. The terms of payment was 2/15, n/45, including a sales tax of 6%. The Co. availed the concession period of payment. The Co. also incurred the following expenses: Freight charges Rs. 15,000 Labor charger Rs. 10,000 Installation charges Rs. 20,000 Insurance in transit Rs. 25,000 An amount of Rs. 24,400 was paid as fire insurance premium on a three years policy During installation certain parts of machine was damaged and repair cost paid Rs. 10,000 The management of the firm has decided to calculate depreciation by declining balance method at 40% annual rate. On December 31st, 2011 machine was exchanged with a new machine costing Rs. 600,000. The trade in allowance of old machine was Rs. 100,000. Required

a. Compute the cost and gain or loss on exchange of machine.

b. Calculate the amount of cash is to be paid while purchasing new machine.

c. Prepare journal entries in proper form to record the purchase of machine and disposal of machine

Note: Entries without computation will not be accepted