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Q. What do you mean by depreciation? What are the causes for depreciation? Explain the two methods of depreciation. Depreciation means a fall in the quality, quantity or value of the asset. It is defined as the determination in the cost of an asset during a particular period due to wear and tear and obsolescence. It is the allocation of the cost of capital expenditure to the periods of its use. It is used to describe the decrease in book value of an asset. It is considered an expense and is listed in an income statement under expenses. Causes for Depreciation: -Wear and Tear -Efflux of time -Obsolescence -Accident -Fall in market price Methods of depreciation 1.Straight line depreciation 2. Reducing balance method
Determine out the future value of Rs.1000 compounded yearly for 10 years at an interest rate of 10 percent. Solution: The future value 10 years thus would be FV = PV (1+k)
Cost of capital calculation Cost of equity (Ke) Using the dividend valuation model, Ke=D 1 /P 0 + g Pretentious that dividend growth over the last five years is a good
Illustration regarding profit that head office can claim E Ltd sets up a branch in Nyeri on 1 July 2001. Goods are sent to branch at an invoice price which is 10% above cost. S
Terry Corporation had 300,000 shares of common stock outstanding at December 31, 2010. In addition, it had 90,000 stock options outstanding, which had been granted to certain execu
Acquisition of Assets: The cost method of accounting is used for the initial recording of all acquisitions of assets controlled by the authority. Cost is determined as the fair val
ACCOUNTS UNDER TRUSTEE (a) Authorised investments The investments which trustees are permitted to hold may be specifically stated in the will or deed constituting the se
INTRA COMPANY ADJUSTMENTS In preparing the consolidated balance sheet, the following items may require adjustments:. 1 Goodwill 2 Unrealized profit on closing inventory 3
Question: The following information was extracted from the books of William Noel for the year ended 30 April 2009.
ASSOCIATE COMPANIES (IAS 28) An associate company is a company in which the investing company owns more than 20% but less than 50% of the voting rights. This means that the inve
What is Comparability This quality would enable users to identify changes in the business over time (for instance, trend in sales revenue over the past five years). It wou
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