Question

Question 4                                         &nbs

Question 4                                                                            15   Marks

The board of directors of Telmot Instruments is having its Quarterly meeting. Accounting policies are on the agenda, depreciation is being discussed. A new Board member has some strong opinions. He is an environmental Engineer and argues that depreciation must be coupled with a fund to replace company assets, otherwise there is no substance to depreciation. He also challenges the 3-year estimated useful life the company is using to depreciate company computers. He notes that the computers will last 5 years. He argues for depreciating over 5 years instead of 3 years.

Required: Explain the concept of depreciation and what is taken into consideration when determining estimated useful life of an asset

Homework Answers

Answer #1

Concept:

Depreciation is a method by which value of an asset is decreased based on its usage,life of the asset.Usually company depreciates value of an asset based on its estimated life.

Estimated life is either specified in the Indian Companies Act or an expert opinion can be used for depreciating the asset .

In the given case,New board member approach in creating a depreciation fund could be benefical for company,as after the asset gets fully depreciated company will have funds to replace the asset.

Based on the given case,the new member is an environmental engineer and it is assumed that he possesses knowledge of the asset, and considering him as an expert his opinion of considering asset life 5 year instead of 3 years can be considered and asset can be depreciated in 5 years.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 4 15 Marks The board of directors of Telmot Instruments is having its Quarterly meeting....
Question 4 15 Marks The board of directors of Telmot Instruments is having its Quarterly meeting. Accounting policies are on the agenda, depreciation is being discussed. A new Board member has some strong opinions. He is an environmental Engineer and argues that depreciation must be coupled with a fund to replace company assets, otherwise there is no substance to depreciation. He also challenges the 3-year estimated useful life the company is using to depreciate company computers. He notes that the...
1. On January 2, 2020, Collins Company purchased a delivery truck for $45,000 cash. The truck...
1. On January 2, 2020, Collins Company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated residual value of $3,000. Straight-line depreciation was used. Assuming the transactions have commercial substance, prepare the journal entries to record the disposition of the truck on September 1, 2019, under each of the following assumptions: (a) The truck and $55,000 cash were exchanged for equipment that had a fair value of $70,000. (b)...
On January 2, 2020, Collins Company purchased a delivery truck for $45,000 cash. The truck had...
On January 2, 2020, Collins Company purchased a delivery truck for $45,000 cash. The truck had an estimated useful life of seven years and an estimated residual value of $3,000. Straight-line depreciation was used. Assuming the transactions have commercial substance, prepare the journal entries to record the disposition of the truck on September 1, 2019, under each of the following assumptions: (a) The truck and $55,000 cash were exchanged for equipment that had a fair value of $70,000. (b) The...
Question 4 Suppose a company purchased land and a building for $17027184 cash. The appraised value...
Question 4 Suppose a company purchased land and a building for $17027184 cash. The appraised value of the building was $13489468, and the land was appraised at $8238190. What dollar amount of the purchase price will be allocated to the Building account? *Note: for calculations, please do not round the percentage. Question 5 At the beginning of 2023, Apu purchases a new Squishee machine for the Kwik-E-Mart with a cost of $201187. The new machine has an estimated life of...
DISCUSS QUESTION #4 The Oxford Equipment Company purchased a machine 5 years ago at a cost...
DISCUSS QUESTION #4 The Oxford Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machines expected life is 10 years and is being depreciated by the straight-line method at a rate of $8,500 per year. If the machine is kept, it can be sold for $15,000 at the end of its expected life. A new machine can be purchased for $170,000. It has an expected life of 5 years and will reduce cash operating expenses...
Question 13 On April 1, a machine with a useful life of 4 years and a...
Question 13 On April 1, a machine with a useful life of 4 years and a residual value of $12,000 was purchased for $87,000. What is depreciation expense for the second year under double declining balance depreciation assuming a December 31 year end? Select one: a. $21,750 b. $18,750 c. $27,188 d. $23,438 Question 14 If a fixed asset with an original cost of $18,000 and accumulated depreciation of $12,000 is sold for $15,000, the company must __________. Select one:...
Greenmount Ltd, an ASX listed consumer goods corporation aims to acquire a fashion business to generate...
Greenmount Ltd, an ASX listed consumer goods corporation aims to acquire a fashion business to generate new growth opportunities. Following a formal search process, external advisors have identified the following two businesses as best matching entitiesfor a potential take-over: Tallows Ltd and Bilgola Ltd. Only one will be selected. To move forward with the selection process, the external advisor has estimated that both firms have the same entity value of $2m based on a Discounted Cash Flow (DCF) model, i.e....
QUESTION 4 (25 marks) Diversified Industries is a large conglomerate that is continually in the market...
QUESTION 4 Diversified Industries is a large conglomerate that is continually in the market for new acquisitions. The company has grown rapidly over the last ten years through buyouts of medium-size companies. Diversified does not limit itself to companies in any one industry, but looks for companies with a sound financial base and the ability to stand on their own financially. The CEO of the company recently told his executive team that “I want to impress two points on all...
QUESTION Timber Floors Pty. Ltd. is an Australian resident private company for tax purposes and carries...
QUESTION Timber Floors Pty. Ltd. is an Australian resident private company for tax purposes and carries on the business of manufacturing timber floors. It is registered for GST. Amanda, the accountant has prepared the income statement for the year ended 30 June 2018 in accordance with the accounting standards:                       Fees                                                                                                                 $3,089,725 Less: Operating expenses: Advertising                                                                 100,000 Accounting depreciation (note 4)                               150,000 Fringe benefits tax                                                      15,000 Provision for unreported claims (note 5)                    150,000 Provision for long...
QUESTION 47 1. Harrod Company paid $6500 for a 4-month insurance premium in advance on November...
QUESTION 47 1. Harrod Company paid $6500 for a 4-month insurance premium in advance on November 1, with coverage beginning on that date. The balance in the prepaid insurance account before adjustment at the end of the year is $6500, and no adjustments had been made previously. The adjusting entry required on December 31 is: Debit Prepaid Insurance, $1625; credit Insurance Expense, $1625. Debit Prepaid Insurance, $3250; credit Insurance Expense, $3250. Debit Insurance Expense, $3250; credit Prepaid Insurance, $3250. Debit...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT