MGT101 - Financial Accounting - I Solution GDB 2022

This is MGT101 Solution GDB 2022. We are sharing with you here Virtual University GDB Solutions. Today our subject is MGT101 and Topic of the GDB is Provision of Depression on non-current assets & its effect on financial statements. We are sharing with your idea solution for your help and support. Must read question carefully and do it your own self for gaining good marks. Opening date of GDB is 8 th February and the Closing Date is 14 th February. 

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Case Study:

A machine was bought on 1^st April 2021 for Rs. 120,000 by the XYZ Company. The estimated useful life of this machine was determined by an expert value as 5 years. At the end of the year, customer invoice of Rs. 18,000 a confirmed to be uncollectible. The company close the books to accounts on 31^st December each year. It is the policy of company to charge the depreciation on all non-current assets on “the basis of use”. The accountant of business ignored to account for the provision for depression in the financial statements at the end of year 2021 which produce misleading results. As a result, profit shown in the Income Statement at the end of year 2021 is Rs. 560,000.


Required:

• Which amount of provision for depression should be presented as an expense in the Income statement for the period ended on 2021?
• Which amount of Net Book Value of Machine should be presented as an asset in the Balance Sheet as on 31^st December 2021?
• Which fundamental accounting principle was valued due to the non-reporting of provision for depreciation in the Income Statement?
• What will be the correct amount of profit after incorporating the non-reporting of above-mentioned fact?

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MGT101 - Financial Accounting - I Solved Final Term Paper 2021 - File 1

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R1:

Which amount of (Subscribe YouTube Channel V-Expert Services) provision for depression should be presented as an expense in the Income statement for the period ended on 2021?

Answer:

Company XYZ

Cost of Asset = Rs. 120,000

Date of Machinery (raiseforsuccess.blogspot.com) Purchase = 1^st April 2021

Estimate Useful Life of Machine = 5 years

Uncollected Invoice = Rs. 18,000

Date of Closing (raiseforsuccess.blogspot.com) Books of Accounts = 31^st December 2021

Depreciation =?

Tear & wear of any asset is called depreciation. (raiseforsuccess.blogspot.com) There are two types of Depreciation that are as follows:

• Straight Line Method
• Written Down Method

But in this question, we will use straight (raiseforsuccess.blogspot.com) line method because it fulfills our question requirements.

Formula of Depreciation:

Cost of Asset – Residual Value / Useful life of Asset

According to Question:

Cost of Asset - Residual Value / Useful life of Asset (How many months asset in profitable)

Calculation: 1^ST April 2021 to 31^st December 2021

In 1 year – 12 months

9 months in use

By putting (raiseforsuccess.blogspot.com) value in Formula:

Rs. 120,000 – 0 / 5 years (9/12)

= Rs. 24,000 / (9/12)

= Rs. 24,000 x 9 /12

= Rs.18,000

R2:
Which amount (YouTube Channel V-Expert Services) of Net Book Value of Machine should be presented as an asset in the Balance Sheet as on 31^st December 2021?

Answer:

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Net Book Value = Cost – Depreciation
Net Book Value = Rs. 120,000 – Rs. 18,000
Net Book Value = 10, 2000

R3:

Which fundamental accounting principle was valued due to the (Follow Raise For Success Twitter) non-reporting of provision for depreciation in the Income Statement?

Answer: 

Accounting Conservation Principle that company (raiseforsuccess.blogspot.com) requires to be prepared with attention and high degree of verification.

R4:

What will be the correct amount of profit after incorporating (raiseforsuccess.blogspot.com) the non-reporting of above-mentioned fact?
Answer:


Profit = 560,000 – Depreciation
Profit = 560,000 – 18,000
Profit = 542,000

MGT101 Solution GDB 2022
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