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Prepare a depreciation schedule

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Question - A company has bought drilling equipment in April 2016 for €44m. It is estimated that the equipment will be used for 5 years at the end of which it will be disposed for €4m. The company uses the straight line method of depreciation.

Prepare a depreciation schedule if the firm follows a policy of charging full depreciation at the year of purchasing the asset and no depreciation at the year of disposing the asset.

How much profit or loss on disposal the company will make if the drill is disposed in August 2020 for €16m?

If the depreciation policy was different, that is to charge actual depreciation on a quarterly basis at the years of purchasing and disposing the asset, how this will change the depreciation schedule?

How would (3) above affect your answer to (2)?

Open all the necessary accounts and enter all the relevant transactions from the day of purchasing the asset to the day it is disposed as described in (2) above.

Balance all the accounts and realise any profit or loss on disposal through the Disposal Account.

Reference no: EM133155582

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