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Wednesday, July 27, 2016

Hey ! What R u doing at this late hour !!

A firm purchased a 5 years' lease for $40,000 on first January. It decides to write off depreciation on the annuity method. Presuming the rate of interest to be 5% per annum.
Show the lease account for the first 3 years. Calculations are to be made to the nearest dollar.
Annuity Table
Amount required to write off $1 by the annuity method.
Years3%3.5%4%4.5%5%
30.3535300.3596340.3603490.3637730.367209
40.2690270.2722510.2754900.2787440.282012
50.2183550.2214180.2246270.2277920.230975
60.1845980.1876680.1907620.1938780.197017
70.1605060.1635440.1666100.1697010.172820
80.1424560.1454770.1485280.1516100.154722

Solution:


courtesy: google.

According to the annuity table given above, the annual charge for depreciation reckoning interest at 5 percent p.a. would be:
230975 × 40,000 = $9,239
Lease Account
Debit SideCredit Side
Date$Date$
1st Year1st Year
Jan. 1To Cash40,000Dec. 31By Depreciation9,239
Dec. 31To Interest2,000By Balance c/d32,761


42,00042,000






Even at 11.30 at night, burning midnight oil, I was still perusing my Actuarial books bought in 1960s.

Hey !! What are You reading at this late hour !! It is already 12 o' 
clock midnight. Go to bed !!  

My wife shrieked !! 

 No Darling !! 

 I said: 

I want to recall and understand at least something 
before 4th August 2016.

I replied. 


Courtesy: google.

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