Reference no: EM132621567

Kam Excavating Co Limited has bought a JCB Machine for Rs 2 million as of 1 March 2018. The JCB was imported from China and the following additional costs were incurred:

Import duties: Rs440,000

Installation cost: Rs60,000

• Transportation cost in delivering the JCB on the company site: Rs10,000
• As the business of the Company expanded, it bought another JCB machine on 1
• June 2019 for Rs2.5 million inclusive of all import duties and other costs. On 30
• September 2019, Kam Excavating Limited got an interesting proposal and sold its first JCB Machine for Rs2.2 million.

Kam Excavating Ltd has adopted a 31 December as financial year end and has decided on the following policies for its PPE:

1. The company uses the reducing method to depreciate both assets at the rate of 10% per annum.

2. Depreciation is to be provided on a time basis according to the months of use.

The useful life estimated for each of the JCB machine was assessed to be 10 years for both JCBs and the scrap value is Rs100,000 for first JCB and Rs220,000 for the second JCB.

Problem a: For the year ended 31 December 2019, prepare:

1) The machinery account

2) The accumulated depreciation of the machinery account

3) The disposal of machinery account

4) An extract of income statement

5) An extract of balance sheet