Reference no: EM133020261
Question - In July 2017, Sonex Company purchased machinery with an estimated 10-year life. The purchase price of the machinery was Rs.35,000, sales tax Rs.2,500, installation and testing Rs.3,000, freight charges Rs. 1,550, insurance in transit Rs.1,000 and two years accident insurance policy Rs.5,000. The residual value was estimated at Rs.9,900. Sonex uses straight-line depreciation and applies the half-year convention. On Jan 01, 2019 Sonex closed one of its plants and sold this machinery for Rs.33,600.
Required -
a) Compute the cost of machinery.
b) Prepare journal entry to record the sale of machinery on Jan 01, 2019.
c) Calculate the depreciation expense for 2017 and 2018 using double declining balance method.
d) Is there any effect on profit if company change its depreciation method from straight line to double reducing balance method?
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