Reference no: EM133037967

Question - (a) Sana Ltd. purchased a machine on April 30, 2019 at a cost of Rs.325,000 with estimated life of 10 years and scrap value of Rs.25,000. The machine had a working life of 50,000 hours and 150,000 units. The company's accounting year ends on December 31. During the year 2019, the machine worked for 4000 hours produced 12000 units and during the year 2020 it worked for 6000 hours and produced 16000 units.

Required -

1. Compute depreciation expense on December 31 2019 & 2020 under the following methods: (i) Straight Line Method (ii) Working Hours Method (iii) Units Output Method.

2. Give Adjusting Entry for 2019 under Straight Line Method, Closing Entry for 2020 under Working Hours Method.

(b) Mr. Asim started business on January 1 2020, with an investment of Rs.250,000 and maintains his accounting records on single entry basis. On Dec. 31, 2020 the following information was obtained from his accounting records: Cash Rs.85,000, Accounts Receivable Rs.90,000, Merchandise Inventory Rs.120,000, Office Equipment Rs.80,000, Accounts payable Rs.35,000. During the year he withdrew Rs.5,000 p.m. for personal use and made an additional investment of Rs.50,000. Depreciation on office equipment was estimated at 10% and the allowance for bad debts was estimated at 5% of A/c Receivable. Accrued salaries Rs.6,000 and Prepaid Insurance Rs.3,500.

Required -

1. Compute Capital at End and Prepare Statement of Profit & Loss for the year ended Dec. 31, 2020.

2. Prepare Statement of Affairs as on Dec. 31, 2020.