Hammond Limited bought plant and equipment on January 1, 2009 for GH 400,000 with an estimated useful life of 4 years an

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Hammond Limited Bought Plant And Equipment On January 1 2009 For Gh 400 000 With An Estimated Useful Life Of 4 Years An 1 (61.38 KiB) Viewed 31 times

Hammond Limited bought plant and equipment on January 1, 2009 for GH 400,000 with an estimated useful life of 4 years and a scrap value of GH¢25,000. The plant and equipment would produce a similar number of goods each year and the annual profit before depreciation was expected to be GH¢200,000. At the company's management meeting, the Managing Director, Mr. Kofi Hammond was of the view that the non- current asset should be depreciated using the reducing balance method. However, the Chief Accountant, Mr. Isaac Peprah, suggested the use of the straight-line method. Required: Calculate the annual depreciation charges and the net book value (NBV) of the fixed asset at the end of 2009, 2010, 2011 and 2012 using: (a) The straight line method (7% marks) (b) The reducing balance method (7% marks)