On 1st Jan 2001, ABC & CO. Purchased eight machines at a list


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On 1st Jan 2001, ABC & CO. Purchased eight machines at a list price of Rs.260,000 each with trade discount of 5%. The terms of payment were 2/10, n/60. The company made payment within discount period. Additional costs are as follows. Freight charges Rs.150,000. Life insurance is Rs.15,000 and insurance in transit is Rs.25,000. Custom duty Rs.20,000. Installation and testing charges Rs.50,000. Interest charges Rs.500 paid to the bank loan borrowed for the purchase of machine. Some parts damaged during installation and get repaired for Rs.5000. It is estimated that these machines will have a useful life of 15 years with salvage value of Rs.100,000. The company uses the sum of years digit method of providing depreciation expense. Compute cost of machine. Pass adjusting entries. Prepare balance sheet for 2006.

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