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MGT101 GDB 1 Solution Fall 2022

To understand the basic concepts of provision for depreciation on non-current assets and its effect on financial statements.

GDB Question:

A machine was bought on 1st April 2021 for Rs. 120,000 by the XYZ Company. The estimated useful life of this machine was determined by an expert value as 5 years. At the end of year, customer invoice of Rs. 18,000 is confirmed to be uncollectible. The company closes the books of accounts on 31st December each year. It is the policy of company to charge the depreciation on all non-current assets on “the basis of use”. The accountant of business ignored to account for the provision for depreciation in the financial statements at the end of year 2021 which produce misleading results. As a result, profit shown in the Income Statement at the end of year 2021 is Rs. 560,000.

MGT101 GDB 1 Solution Fall 2022, mgt101 gdb solution 2022, mgt101 gdb solution 2022, mgt101 gdb solution, mgt101 gdb 2021

Required:

  • Which amount of provision for depreciation should be presented as an expense in the Income statement for the period ended on 2021?
  • Which amount of Net Book Value of Machine should be presented as an asset in the Balance Sheet as on 31st December 2021?
  • Which fundamental accounting principle was violated due to the non-reporting of provision for depreciation in the Income Statement?
  • What will be the correct amount of profit after incorporating the non-reporting of above mentioned fact?

MGT101 GDB 1 Solution Fall 2022, mgt101 gdb solution 2022, mgt101 gdb solution 2022, mgt101 gdb solution, mgt101 gdb 2021

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