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Depreciation Problems

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4 views1 page

Depreciation Problems

Uploaded by

ashnasalim142
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. On 1st April 2007, Sharma Enterprises Pvt. Ltd.

acquired a four-year
lease for ₹3 lakhs. The company decided to establish a depreciation
fund to provide for the lease renewal at the end of the four-year
term. The investments are expected to earn interest at 12% per
annum.

According to the sinking fund table, an annual investment of


₹0.209234 will yield ₹1 at the end of 4 years at 12% interest rate.
The company makes investments in multiples of ₹10.

On 31st March 2011, the depreciation fund investment realized its


book value. On 1st April 2011, the same lease was renewed for
another four-year period by paying ₹3,50,000. Give the journal
entries and all the ledger accounts associated with it.

2. On 1st April 2022, Gupta Technologies Ltd. acquired a five-year


lease for a prime office space in Bengaluru for ₹5.5 lakhs. The
company decided to establish a sinking fund to provide for the lease
renewal at the end of the five-year term. The investments are
expected to earn interest at 10% per annum.

According to the sinking fund table, an annual investment of


₹0.163797 will yield ₹1 at the end of 5 years at 10% interest rate.
The company makes investments in multiples of ₹100.

On 31st March 2027, due to favorable market conditions, the sinking


fund investments were realized at a profit of 8% above their book
value. On 1st April 2027, the same lease was renewed for another
five-year period by paying ₹6,25,000. Give the journal entries and
all the ledger accounts associated with it.

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