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Extracts from this document...


  • Statement of task

Firstly I need to get information about the machinery from the company. To get it from a very reliable source I will get the bills of the two machines bought in 2007 from the company’s accountant. After that I will start working on the project.

                            Initially I will first find the total individual cost of both the machines from the bills provided by the accountant. Then review the present book value of the machine after it has depreciated for two years, provided by the accountant.

                           To calculate the rate of depreciation from the data provided by the accountant I will use the formula of reducing balance depreciation.

  • The formula used to calculate the reducing balance depreciation is

BVt= C ((1)-

...read more.


t = C ((1)-(rate/100)) ^n.

After I have the forecasted the depreciation for the machinery through the depreciation schedules I will calculate loan repayment for the machinery as the company had taken a loan to buy the machinery. I have the amount of loan taken by the company and also have the interest rate and the payback period from the data provided by the accountant. Thus I will track this loan and find the monthly repayment required for the company to repay the loan with interest in the payback period limit set by the bank.

  • Data collection/analysis:

The company bought two machines in 2007 the individual total cost of the machines are:

  • Machine 1- 2611440 /- INR
  • Machine 2- 2527200 /- INR

...read more.


  • Method 1 – Flat rate depreciation

As it is flat rate depreciation the rate we found out through reducing balance method cannot be used. We can find the amount which has depreciated from the original cost for the machines and then divide it by 2 as we have the data for 2 years and thus we will find out at with what constant amount is the machine depreciating.

  • For machine 1:

= 2611440-1935645 = total depreciated amount

total depreciated amount = 675795 INR

depreciation per year = 675795/2

depreciation per year = 337897.5 INR

  • For machine 2:

= 2527200-1873031 = total depreciated amount

total depreciated amount = 654169 INR

depreciation per year = 654169 /2

depreciation per year = 327084.5 INR

Now for flat rate depreciation we have the constant amount depreciating for both the machines, thus now through a depreciation schedule we can forecast the Book values for 5 future years.

...read more.

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