Shane Engineering Ltd. Worked out an estimated expenditure of $ 1,20,000 over a period of 8 years on repairs of machinery. The company decided to raise a 'Provision for Repairs and Renewals Account by debiting Profit & Loss Account with a uniform amount every year. The actual expenditure on repairs during the first four years amounted to $ 5,200, $ 12,900; $ 10,700 and $ 16,800. Prepare Provision for Repairs and Renewal Account stating in the footnote how the figures would appear in Balance Sheet and also for treatment in computing of managerial remuneration.
Shane Engineering Ltd. Worked out an estimated expenditure of $ 1,20,000 over a period of 8 years on repairs of machinery. The company decided to raise a 'Provision for Repairs and Renewals Account by debiting Profit & Loss Account with a uniform amount every year. The actual expenditure on repairs during the first four years amounted to $ 5,200, $ 12,900; $ 10,700 and $ 16,800. Prepare Provision for Repairs and Renewal Account stating in the footnote how the figures would appear in Balance Sheet and also for treatment in computing of managerial remuneration.
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 4PB: During the current year, Arkells Inc. made the following expenditures relating to plant machinery. ...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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