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Page No 14.48:

Question 1:

Calculate the Amount of annual Depreciation and Rate of Depreciation under Straight Line Method (SLM) from the following:
Purchased a second-hand machine for ₹ 96,000, spent ₹ 24,000 on its cartage, repairs and installation, estimated useful life of machine 4 years. Estimated residual value ₹ 72,000.

Answer:

Amount of Annual Depreciation=Cost of MachineScrap Value of Machine Life in Years                                       =1,20,00072,0004=Rs 12,000Rate of Depreciation=Amount of DepreciationCost of Machine×100                                  =12,0001,20,000×100=10%p.a.

Page No 14.48:

Question 2:

​​On 1st April, 2016, X Ltd. purchased a machine costing ₹ 4,00,000 and spent ₹ 50,000 on its installation. The estimated life of the machinery is 10 years, after which its residual value will be ₹ 50,000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare Machinery Account for the first three years. The books are closed on 31st March every year.

Answer:

Book of X Ltd.

Machinery Account 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

April 01

Bank

 

4,00,000

Mar.31

Depreciation

 

40,000

April 01

Bank (Erection Expense)

 

50,000

 

Balance c/d

 

4,10,000

 

 

 

4,50,000

 

 

 

4,50,000

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

4,10,000

Mar.31

Depreciation

 

40,000

 

 

 

 

 

Balance c/d

 

3,70,000

 

 

 

4,10,000

 

 

 

4,10,000

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

3,70,000

Mar.31

Depreciation

 

40,000

 

 

 

 

 

Balance c/d

 

3,30,000

 

 

 

3,70,000

 

 

 

3,70,000

 

 

 

 

 

 

 

 

Calculation of Depreciation:

Depreciation p.a.=4,00,000+50,000-50,000(Scrap Value)10 years                              = 40,000 p.a.

Page No 14.48:

Question 3:

On 1st April, 2015, furniture costing ₹ 55,000 was purchased. It is estimated that its life is 10 years at the end of which it will be sold for ₹ 5,000. Additions are made on 1st April 2016 and 1st October, 2018 to the value of ₹ 9,500 and ₹ 8,400 (Residual values ₹ 500 and ₹ 400 respectively). Show the Furniture Account for the first four years, if Depreciation is written off according to the Straight Line Method.

Answer:

Furniture Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015

 

 

 

2016

 

 

 

April 01

Bank (F1)

 

55,000

March 31

Depreciation (F1)

 

5,000

 

 

 

 

March 31

Balance c/d (F1)

 

50,000

 

 

 

55,000

 

 

 

55,000

2016

 

 

 

2017

 

 

 

April 01

Balance b/d (F1)

 

50,000

March 31

Depreciation

 

 

April 01

Bank (F2)

 

9,500

 

F1

5,000

 

 

 

 

 

 

 

F2

900

 

5,900

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

F1

45,000

 

 

 

 

 

 

 

F2

8,600

 

53,600

 

 

 

59,500

 

 

 

59,500

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

F1

45,000

 

 

 

F1

5,000

 

 

 

F2

8,600

 

53,600

 

F2

900

 

5,900

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

F1

40,000

 

 

 

 

 

 

 

F2

7,700

 

47,700

 

 

 

53,600

 

 

 

53,600

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

F1

40,000

 

 

 

F1

5,000

 

 

 

F2

7,700

 

47,700

 

F2

900

 

 

Oct. 01

Bank (F3)

 

8,400

 

F3

400

 

6,300

 

 

 

 

 

 

 

 

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

F1

35,000

 

 

 

 

 

 

 

F2

6,800

 

 

 

 

 

 

 

F3

8,000

 

49,800

 

 

 

56,100

 

 

 

56,100

 

 

 

 

 

 

 

 

Working Notes:

Page No 14.48:

Question 4:

From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2019:

1st April, 2018 : Purchased a second-hand machinery for ₹ 40,000
1st April, 2018 : Spent ₹ 10,000 on repairs for making it serviceable.
30th September, 2018 : Purchased additional new machinery for ₹ 20,000.
31st December, 2018 : Repairs and renewal of machinery ₹ 3,000.
31st March, 2019 : Depreciate the machinery at 10% p.a.

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particular

J.F.

Amount

()

2018

 

 

 

2019

 

 

 

Apr.01

Bank (M1)

 

50,000

Mar.31

Depreciation

 

 

Sept 30

Bank (M2)

 

20,000

 

M1

5,000

 

 

 

 

 

 

 

M2 (6 months)

1,000

 

6,000

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

M1

45,000

 

 

 

 

 

 

 

M2 (6 months)

19,000

 

64,000

 

 

 

70,000

 

 

 

70,000

 

 

 

 

 

 

 

 

Note: 

Repair and renewal made on December 31, 2018 will not be recorded in Machinery Account because, this repair was made after putting the Machinery into use.

Page No 14.48:

Question 5:

An asset was purchased for ₹ 10,500 on 1st April, 2012. The scrap value was estimated to to be ₹ 500 at the end of asset's 10 years' life. Straight Line Method of depreciation was used. The accounting year ends on 31st March every year. The asset was sold for ₹ 600 on 31st March, 2019. Calculate the following.
(i) The Depreciation expense for the year ended 31st March, 2013.
(ii) The net book value of the asset on 31st March, 2017.
(iii) The gain or loss on sale of the asset on 31st March, 2019.

Answer:

Asset Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2012

 

 

 

2013

 

 

 

April 01

Bank

 

10,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

9,500

 

 

 

10,500

 

 

 

10,500

2013

 

 

 

2014

 

 

 

April 01

Balance b/d

 

9,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

8,500

 

 

 

9,500

 

 

 

9,500

2014

 

 

 

2015

 

 

 

April 01

Balance b/d

 

8,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

7,500

 

 

 

8,500

 

 

 

8,500

2015

 

 

 

2016

 

 

 

April 01

Balance b/d

 

7,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

6,500

 

 

 

7,500

 

 

 

7,500

2016

 

 

 

2017

 

 

 

April 01

Balance b/d

 

6,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

5,500

 

 

 

6,500

 

 

 

6,500

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

5,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

4,500

 

 

 

5,500

 

 

 

5,500

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

4,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Bank

 

600

 

 

 

 

Mar.31

Profit and Loss (Loss)

 

2,900

 

 

 

4,500

 

 

 

4,500

 

 

 

 

 

 

 

 

(i) Depreciation Expense for the year ended March 31, 2013 is Rs 1000

(ii) The Net Book Value of the asset on March 31, 2017 is Rs 5,500

(iii) Loss on Sale of the asset on March 31, 2019 is Rs 2,900



Page No 14.49:

Question 6:

On 1st April, 2015, A Ltd. purchased a machine for ₹ 2,40,000 and spent ₹ 10,000 on its erection. On 1st October, 2015 an additional machinery costing ₹ 1,00,000 was purchased. On 1st October, 2017, the machine purchased on 1st April, 2015 was sold for ₹ 1,43,000 and on the same date, a new machine was purchased at cost of ₹ 2,00,000.
Show the Machinery Account for the first four financial years after charging Depreciation at 5% p.a. by the Straight Line Method.

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015

 

 

 

2016

 

 

 

April 01

Bank (M1)

 

2,50,000

March 31

Depreciation

 

 

Oct. 01

Bank (M2)

 

1,00,000

 

M1

12,500

 

 

 

 

 

 

 

M2 (6 Months)

2,500

 

15,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

M1

2,37,500

 

 

 

 

 

 

 

M2

97,500

 

3,35,000

 

 

 

3,50,000

 

 

 

3,50,000

2016

 

 

 

2017

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

M1

2,37,500

 

 

 

M1

12,500

 

 

 

M2

97,500

 

3,35,000

 

M2

5,000

 

17,500

 

 

 

 

 

 

 

 

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

M1

2,25,000

 

 

 

 

 

 

 

M2

92,500

 

3,17,500

 

 

 

3,35,000

 

 

 

3,35,000

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

 

Oct. 01

Depreciation (for 6 months)

 

6,250

 

M1

2,25,000

 

 

Oct. 01

Bank (M1 sold)

 

1,43,000

 

M2

92,500

 

3,17,500

Oct. 01

Profit and Loss (loss on sale)

 

75,750

          2017      

July 01

Bank (M3)

 

2,00,000

March 31

Depreciation

 

 

 

 

 

 

 

M2

5,000

 

 

 

 

 

 

 

M3 (for 6 months)

5,000

 

10,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

M2

87,500

 

 

 

 

 

 

 

M3

1,95,000

 

2,82,500

 

 

 

5,17,500

 

 

 

5,17,500

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

M2

87,500

 

 

 

M2

5,000

 

 

 

M3

1,95,000

 

2,82,500

 

M3

10,000

 

15,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

M2

82,500

 

 

 

 

 

 

 

M3

1,85,000

 

2,67,500

 

 

 

2,82,500

 

 

 

2,82,500

 

 

 

 

 

 

 

 

 

Working Notes:

1. Calculation of Deprecation  

2. Calculation of profit or loss on sale of Machine 1

Particulars

Amount

()

Book Value on April 01, 2017

2,25,000

Less: Deprecation for six month

(6,250)

Book Value on Oct. 01, 2017

2,18,750

Less: Sale Proceeds

(1,43,000)

Loss on Sale of Machine

75,750

 

Page No 14.49:

Question 7:

A Van was purchased on 1st April, 2016 for ₹ 60,000 and ₹ 5,000 was spent on its repair and registration. On 1st October, 2017 another van was purchased for ₹ 70,000. On 1st April, 2018, the first van purchased on 1st April, 2016 was sold for ₹ 45,000 and a new van costing ₹ 1,70,000 was purchased on the same date. Show the Van Account from 2016-17 to 2018-19 on the basis of Straight Line Method, if the rate of Depreciation charged is 10% p.a. Assume that books are closed on 31st March every year.

Answer:

Van Account 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

April 01

Bank (I)

 

65,000

March 31

Depreciation (I)

 

6,500

 

 

 

 

March 31

Balance c/d (I)

 

58,500

 

 

 

65,000

 

 

 

65,000

2017

 

 

 

2018

 

 

 

April 01

Balance b/d (I)

 

58,500

March 31

Depreciation

 

 

Oct. 01

Bank (II)

 

70,000

 

(I)

6,500

 

 

 

 

 

 

 

(II) (for 6 month)

3,500

 

10,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

(I)

52,000

 

 

 

 

 

 

 

(II)

66,500

 

1,18,500

 

 

 

1,28,500

 

 

 

1,28,500

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

 

April 01

Bank (I)

 

45,000

 

(I)

52,000

 

 

April 01

Profit and Loss (Loss on Sale)

 

7,000

          2018      

 

(II)

66,500

 

1,18,500

March 31

Depreciation

 

 

April 01

Bank (III)

 

1,70,000

 

(II)

7,000

 

 

 

 

 

 

 

(III)

17,000

 

24,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

(II)

59,500

 

 

 

 

 

 

 

(III)

1,53,000

 

2,12,500

 

 

 

2,88,500

 

 

 

2,88,500

 

 

 

 

 

 

 

 

Working Notes

1. Calculation of Annual Depreciation

2. Calculation of profit or loss on sale of Van (I)

 

Particulars

Amount

()

Book Value on Apr. 01, 2018

52,000

Less: Sale of Van

(45,000)

Loss on Sale of Van

7,000

Page No 14.49:

Question 8:

On 1st April, 2015, Star Ltd. purchased 5 machines for ₹ 60,000 each. On 1st April, 2017, one of the machine was sold at a loss of ₹ 8,000. On 1st July, 2018, second machine was sold at a loss of ₹ 12,500. A new machine was purchased for ₹ 1,00,000 on 1st October, 2018.
Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year and depreciation is charged @ 10% per annum as per Straight Line Method.

Answer:

Dr.

Machinery A/c

Cr.

Date

Particulars

Amount

(₹)

Date

Particulars

Amount

(₹)

2015  

 

2016  

 

April 01 To Cash/Bank A/c (60,000 × 5)

3,00,000

March 31 By Depreciation A/c (3,00,000 × 10/100)

30,000

   

 

March 31 By balance c/d

2,70,000

   

 

 

 

 

   

3,00,000

   

3,00,000

2016  

 

2017  

 

April 01 To balance b/d

2,70,000

March 31 By Depreciation A/c (3,00,000 × 10/100)

30,000

   

 

March 31 By balance c/d

2,40,000

   

 

   

 

   

2,70,000

   

2,70,000

2017  

 

2017  

 

April 01 To balance b/d

2,40,000

April 01 By Bank A/c (WN1)

40,000

   

 

April 01 By Profit & Loss A/c (Loss on sale)

8,000

   

 

2018  

 

   

 

March 31 By Depreciation A/c (2,40,000 × 10/100)

24,000

   

 

  (On remaining machinery)

 

   

 

March 31 By balance c/d

1,68,000

   

 

   

 

   

2,40,000

   

2,40,000

2018  

 

2018  

 

April 01 To balance c/d

1,68,000

July 1 By Depreciation A/c (6,000 × 3/12)

1,500

Oct.01 To Cash/Bank A/c

1,00,000

July 1 By Bank A/c (WN2)

28,000

   

 

July 1 By Profit & Loss A/c (Loss on Sale)

12,500

   

 

2019  

 

   

 

March 31 By Depreciation A/c (On remaining

23,000

   

 

  Machinery)

 

   

 

  [(1,80,000 × 10/100) +

 

   

 

  (1,00,000 × 10/100 × 6/12)]

 

   

 

March 31 By balance c/d

2,03,000

   

 

   

 

   

2,68,000

   

2,68,000

   

 

   

 


Working Notes:
1) Calculation of Sale proceeds from Machinery sold on 1st April, 2017
Book Value of the Machine as on 1st April, 2017 = (Total opening balance of Machinery on this date/5)
  = ₹ (2,40,000/5) = ₹ 48,000
Loss on Sale of Machinery = ₹ 8,000
Sale proceeds from the Machinery = Book Value of the Machine as on 1st April, 2017 – Loss on Sale
  = ₹ (48,000 – 8,000) = ₹ 40,000
     
2) Calculation of Sale proceeds from Machinery sold on 1st July 2018
Book Value of the Machine as on 1st July, 2018 = [(Total opening balance of Machinery on this date/4) –  Depreciation]
  = ₹ [(1,68,000/4) – 1,500] = ₹ 40,500
Loss on Sale of Machinery = ₹ 12,500
Sale proceeds from the Machinery = Book Value of the Machine as on 1st July, 2018 – Loss on Sale
  = ₹ (40,500 – 12,500) = ₹ 28,000

Page No 14.49:

Question 9:

A company whose accounting year is a financial year, purchased on 1st July, 2015 machinery costing ₹ 30,000.
It purchased further machinery on 1st January, 2016 costing ₹ 20,000 and on 1st October, 2016 costing ₹ 10,000.
On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for ₹ 3,000.
Show how Machinery Account would appear in the books of the company. It being given that machinery was depreciated by Fixed Instalment Method at 10% p.a. What would be the value of Machinery Account on 1st April, 2018?

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015

 

 

 

2016

 

 

 

July 01

Bank (I)

 

30,000

March 31

Depreciation

 

 

2015              

Jan. 01

Bank (II)

 

20,000

 

I (for 9 months)

2,250

 

 

 

 

 

 

 

II

500

 

2,750

 

 

 

 

March 31

Balanced c/d

 

 

 

 

 

 

 

I

27,750

 

 

 

 

 

 

 

II

19,500

 

47,250

 

 

 

50,000

 

 

 

50,000

2016

 

 

 

2017

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

I

27,750

 

 

 

I

3,000

 

 

 

II

19,500

 

47,250

 

II

2,000

 

 

 

 

 

 

 

III

500

 

5,500

Oct. 01

Bank (III)

 

10,000

March 31

Balance c/d

 

 

 

 

 

 

 

I

24,750

 

 

 

 

 

 

 

II

17,500

 

 

 

 

 

 

 

III

9,500

 

51,750

 

 

 

57,250

 

 

 

57,250

2017

 

 

 

2017

 

 

 

April 01

Balance b/d

 

 

April 01

Bank I(1/3rd portion)

 

3,000

 

I

24,750

 

 

April 01

Profit and Loss (Loss on Sale of I)

 

5,250

          2018      

 

II

17,500

 

 

March 31

Depreciation

 

 

 

III

9,500

 

51,750

 

I (on 2/3rd portion)

2,000

 

 

 

 

 

 

 

II

2,000

 

 

 

 

 

 

 

III

1,000

 

5,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

I (on 2/3rd portion)

14,500

 

 

 

 

 

 

 

II

15,500

 

 

 

 

 

 

 

III

8,500

 

38,500

 

 

 

51,750

 

 

 

51,750

 

 

 

 

 

 

 

 

Working Notes

1. Calculation of Depreciation

 

Calculation of profit or loss on sale of 1/3rd Portion of Machine I

Particulars

Amount ()

Book Value of 1/3rd portion of Machine I on April 01, 2017 (24,750 × 1/3)

8,250

Less: Sale Value

(3,000)

Loss on sale

5,250

 



Page No 14.50:

Question 10:

On 1st July, 2015, A Co. Ltd. purchases second-hand machinery for ₹ 20,000 and spends ₹ 3,000 on reconditioning and installing it. On 1st January, 2016, the firm purchases new machinery worth ₹ 12,000. On 30th June, 2017, the machinery purchased on 1st January, 2016, was sold for ₹ 8,000 and on 1st July, 2017, a fresh plant was installed.
Payments for this plant was to be made as follows:
 

1st July, 2017 ₹ 5,000
30th June, 2018 ₹ 6,000
30th June, 2019 ₹ 5,500

Payments in 2018 and 2019 include interest of ₹ 1,000 and ₹ 500 respectively.
The company writes off 10% p.a. on the original cost. The accounts are closed every year on 31st March. Show the Machinery Account for the year ended 31st March, 2018.

Answer:

Books of A. Co. Ltd

Machinery

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015

 

 

 

2016

 

 

 

July 01

Bank (I) (20,000 + 3,000)

 

23,000

Mar.31

Depreciation

 

 

2016

 

 

 

 

I (for 9 months)

1,725

 

 

Jan.01

Bank (II)

 

12,000

 

II (for 3 months)

300

 

2,025

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I

21,275

 

 

 

 

 

 

 

II

11,700

 

32,975

 

 

 

35,000

 

 

 

35,000

2016

 

 

 

2017

 

 

 

April 01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

I

21,275

 

 

 

I

2,300

 

 

 

II

11,700

 

32,975

 

II

1,200

 

3,500

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I

18,975

 

 

 

 

 

 

 

II

10,500

 

29,475

 

 

 

32,975

 

 

 

32,975

2017

 

 

 

2017

 

 

 

April 01

Balance b/d

 

 

June 30

Bank (II)

 

8,000

 

I

18,975

 

 

June 30

Depreciation (II) (for 3 months)

 

300

 

II

10,500

 

29,475

June 30

Profit and Loss (Loss)

 

2,200

July 01

Bank (III)

 

5,000

2018

 

 

 

July 01

Creditors for plant (III)

 

10,000

Mar.31

Depreciation

 

 

 

 

 

 

 

I

2,300

 

 

 

 

 

 

 

III (on 15,000 for 8 months)

1,125

 

3,425

 

 

 

 

 

Balance c/d

 

 

 

 

 

 

 

I

16,675

 

 

 

 

 

 

 

III

13,875

 

30,550

 

 

 

44,475

 

 

 

44,475

 

 

 

 

 

 

 

 

 

Working Notes

1. Calculation of Depreciation

2.     Calculation of profit on loss on sale of Machine (II)

 

Particulars

Amount (Rs)

Book Value of Machine (II) on April 01, 2017

10,500

Less: Depreciation for 3 Months

(300)

Book Value on June 30

10,200

Less: Sale

(8,000)

Loss on Sale

2,200

Page No 14.50:

Question 11:

On 1st April, 2016, Shivam Enterprise purchased a second-hand machinery for ₹ 52,000 and spent ₹ 2,000 on cartage, ₹ 3,000 on unloading, ₹ 2,000 on installation and ₹ 1,000 as brokerage of the middle man. It was estimated that the machinery will have a scrap value of ₹ 6,000 at the end of its useful life, which is 10 years. On 31st December 2016, repairs and renewals amounted to ₹ 2,500 were paid. On 1st October, 2018, this machine was sold for ₹ 30,600 and an amount of ₹ 600 was paid as commission to an agent. Calculate the amount of annual depreciation and rate of depreciation. Also prepare the Machinery Account for first 3 years, assuming that firm follows financial year for accounting.

Answer:

Amount of Depreciation=Cost of MachineScrap Value of Machine Life in Years                                       =60,000 (Note)6,00010=₹ 5,400Rate of Depreciation=Amount of DepreciationCost of Machine×100                                  =5,40060,000×100=9% p.a.
 

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

()

Date

Particulars

Amount

()

2016

 

 

2017

 

 

Apr. 01

Bank A/c

60,000

Mar. 31

Depreciation A/c

5,400

 

 

 

Mar. 31

Balance c/d

54,600

 

 

60,000

 

 

60,000

2017

 

 

2018

 

 

Apr. 01

Balance b/d

54,600

Mar. 31

Depreciation A/c

5,400

 

 

 

Mar. 31

Balance c/d

49,200

 

 

 

 

 

 

 

 

54,600

 

 

54,600

2018

 

 

2019

 

 

Apr. 01

Balance b/d

49,200

Oct. 01

Depreciation A/c (for 6 months)

2,700

 

 

 

 

Bank A/c (Sale)

30,000

 

 

 

 

Profit and Loss A/c (Loss on Sale)

16,500

 

 

 

 

 

 

 

 

49,200

 

 

49,200

 

 

 

 

 

 

             

 

Working Notes: Calculation of Profit or Loss on Sale

Particulars

Amount

Value of Machine as on Apr. 01, 2018

49,200

Less: Depreciation for 6 months

2,700

Value of M1 as on Oct. 01, 2018

46,500

Less: Sale Value

30,000

Loss on Sale

16,500

 

 

 

Note:

1. All the expenses incurred up to the date at which machine is put in use will be added to cost of machine.
2. The amount spent on repairs is a recurring nature expenses. So, it will not be added to Machine A/c.
3. Cost of Machine = 52,000 + 2,000 + 3,000 + 2,000 + 1,000 = Rs 60,000



Page No 14.51:

Question 12:

Modern Ltd. purchased a machinery on 1st August, 2016 for ₹ 60,000. On 1st October, 2017, it purchased another machine for ₹ 20,000 plus CGST and SGST @ 6% each. On 30th June, 2018, it sold the first machine purchased in 2016 for ₹ 38,500 charging IGST @ 12%. Depreciation is provided @ 20% p.a. on the original cost each year. Accounts are closed on 31st March every year. Prepare the Machinery Account for three years.

Answer:

Books of Modern Ltd.

Machinery Account 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

Aug.01

Bank (M1)

 

60,000

March 31

Depreciation

 

 

 

 

 

 

 

M1 (for 8 months)

 

8,000

 

 

 

 

March 31

Balance c/d

 

52,000

 

 

 

60,000

 

 

 

60,000

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

52,000

March 31

Depreciation

 

 

Oct. 01

Bank (M2)

 

20,000

 

M1

12,000

 

 

 

 

 

 

 

M2 (6 months)

2,000

 

14,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

M1

40,000

 

 

 

 

 

 

 

M2

18,000

 

58,000

 

 

 

72,000

 

 

 

72,000

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

 

June 30

Depreciation (M1) (for 3 months)

 

3,000

 

M1

40,000

 

 

June 30

Bank (M1)

 

38,500

 

M2

18,000

 

58,000

2018

 

 

 

June 30 Profit and Loss (profit)   1,500 Mar.31 Depreciation (M2)   4,000

 

 

 

 

Mar.31

Balance c/d

 

14,000

 

 

 

59,500

 

 

 

59,500

 

 

 

 

 

 

 

 

Working Notes

1. Calculation of Annual Depreciation

Particulars

Amount

()

Value on Apr 01, 2018

40,000

Depreciation for 3 Months

(3,000)

Value on June 30, 2018

37,000

Less: Sales Value of Machine

(38,500)

Profit on sale of Machine 1

1,500


3. Journal entries for purchase and sale with GST
Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2017
 
 
 
 
 
Oct 01
Machinery A/c
Dr.
 
20,000
 
 
Input CGST A/c
Dr.
 
1,200
 
 
Input SGST A/c
Dr.
 
1,200
 
 
  To Bank A/c
 
 
 
22,400
 
(Machinery purchased with CGST and SGST @ 6% each paid)
 
 
 
 
 
 
 
 
 
 
2018
 
 
 
 
 
Jun 30
Bank A/c
Dr.
 
43,120
 
 
  To Machinery A/c
 
 
 
38,500
 
  To Output IGST A/c
(Machinery purchased on 1st Aug, 2015 sold with IGST @ 12%.)
 
 
 
4,620
 
 
 
 
 
 
 
 
 
 
 
 

Page No 14.51:

Question 13:

On 1st July, 2016, Sohan Lal & Sons purchased a plant costing ₹ 60,000. Additonal plant was purchased on 1st January, 2017 for ₹ 40,000 and on 1st October, 2017, for ₹ 20,000, plus CGST and SGST @ 6% each. On 1st April, 2018, one-third of the plant purchased on 1st July, 2016, was found to have become obsolete and was sold for ₹ 6,000, charging CGST and SGST @ 6% each.
Prepare the Plant Account for the first three years in the books of Sohan Lal & Sons. Depreciation is charged @ 10% p.a. on Straight Line Method. Accounts are closed on 31st March each year.

Answer:

Books of Sohan Lal & Sons

Plant Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

July 01

Bank (I)

 

60,000

March 31

Depreciation

 

 

 

 

 

 

 

(I) for 9 months

4,500

 

 

2016

 

 

 

 

(II) for 3 months

1,000

 

5,500

Jan. 01

Bank (II)

 

40,000

March 31

Balance c/d

 

 

 

 

 

 

 

(I)

55,500

 

 

 

 

 

 

 

(II)

39,000

 

94,500

 

 

 

1,00,000

 

 

 

1,00,000

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

 

March 31

Depreciation

 

 

 

(I)

55,500

 

 

 

(I)

6,000

 

 

 

(II)

39,000

 

94,500

 

(II)

4,000

 

 

Oct. 01

Bank (III)

 

20,000

 

(III) for 6 months

1,000

 

11,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

(I)

49,500

 

 

 

 

 

 

 

(II)

35,000

 

 

 

 

 

 

 

(III)

19,000

 

1,03,500

 

 

 

1,14,500

 

 

 

1,14,500

2018

 

 

 

2018

 

 

 

April 01

Balance b/d

 

 

April 01

Bank

 

6,000

 

(I)

49,500

 

 

April 01

Profit and Loss (loss)(16,500 – 6,000)

 

10,500

          2019      

 

(II)

35,000

 

 

March 31

Depreciation

 

 

 

(III)

19,000

 

1,03,500

 

(I)

4,000

 

 

 

 

 

 

 

(II)

4,000

 

 

 

 

 

 

 

(III)

2,000

 

10,000

 

 

 

 

March 31

Balance c/d

 

 

 

 

 

 

 

(I)

29,000

 

 

 

 

 

 

 

(II)

31,000

 

 

 

 

 

 

 

(III)

17,000

 

77,000

 

 

 

1,03,500

 

 

 

1,03,500

 

 

 

 

 

 

 

 

Working Notes

1. Calculation of Depreciation

2. Calculation of profit or loss on Sale of Plant I

Particulars

Amount

()

1/3rd of Book Value of Plant I as on April 01, 2018( 49,500 × 1/3)

16,500

Less: Sale of Plant

(6,000)

Loss on Sale of Plant

10,500

3. Journal entries for purchase and sale with GST

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2017
 
 
 
 
 
Oct 01
Machinery A/c
Dr.
 
20,000
 
 
Input CGST A/c
Dr.
 
1,200
 
 
Input SGST A/c
Dr.
 
1,200
 
 
  To Bank A/c
 
 
 
22,400
 
(Machinery purchased with CGST and SGST @ 6% each paid)
 
 
 
 
 
 
 
 
 
 
2018
 
 
 
 
 
Apr 1
Bank A/c
Dr.
 
6,720
 
 
  To Machinery A/c
 
 
 
6,000
 
  To Output CGST A/c
  To Output SGST A/c
(Machinery purchased on 1st July, 2015 sold with CGST and SGST @ 6% each.)
 
 
 
360
360
 
 
 
 
 
 
 
 
 
 
 
 

Page No 14.51:

Question 14:

Following balances appear in the books of Rama Bros:

   
1st April, 2016 Machinery A/c 80,000
  Provision for Depreciation A/c 36,000

On 1st April, 2016, they decided to sell a machine for ₹ 8,700. This machine was purchased for ₹ 16,000 in April, 2012. Prepare the Provision for Depreciation Account and Machinery Account on 31st March, 2017, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line Method.

Answer:

Books of Rama Bros.

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2016

 

 

 

Apr.01

Balance b/d (64,000 + 16,000)

 

80,000

Apr.01

Provision for Depreciation

 

6,400

 

 

 

 

Apr.01

Bank

 

8,700

 

 

 

 

Apr.01

Profit and Loss

 

900

        2017      

 

 

 

 

Mar.31

Balance c/d

 

64,000

 

 

 

80,000

 

 

 

80,000

 

 

 

 

 

 

 

 

                   

 

Provision for Depreciation Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2016

 

 

 

Apr.01

Machinery Account (Accumulated Dep. on Machine Sold)

 

6,400

Apr.01

Balance b/d

 

36,000

2017
Mar.31

Balance c/d

 

36,000

2017
Mar.31

Depreciation (on 64,000 @10%)

 

6,400

 

 

 

42,400

 

 

 

42,400

 

 

 

 

 

 

 

 

                   

 

Working Notes

(1) Calculation of Book Value of Machine Sold on April 01, 2015

Particulars

Amount ()

Machine purchased in 2012

16,000

Less: Accumulate Depreciation for 4 years till Mar 31, 2015 (1,600 × 4)

(6,400)

Book value on April 01, 2016

9,600

 

(2)Calculation of profit or loss on Sale of Machine

Particulars

Amount ()

Book Value on April 01, 2016

9,600

Less: Sale Value

(8,700)

Loss on Sale of Machine

900

 

Page No 14.51:

Question 15:

Following balances appear in the books of Priyank Brothers:

   
1st April, 2017 Machinery A/c 20,00,000
  Provision for Depreciation A/c 8,00,000

On 1st April, 2017, they decide to sell a machine for ₹ 5,00,000. This machine was purchased for ₹ 7,50,000 on 1st April, 2014. Prepare the Machinery Account and Provision for Depreciation Account for the year ended 31st March, 2018 assuming that the firm has been charging Depreciation @ 10% p.a. on the Straight Line Method.

Answer:

Books of Priyank Brothers

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

 

 

 

2017

 

 

 

April 01

Balance b/d

 

20,00,000

April 01

Provision for Depreciation

 

2,25,000

 

 

 

 

April 01

Bank

 

5,00,000

 

 

 

 

April 01

Profit and Loss (Loss)

 

25,000

 

 

 

 

2018

 

 

 

 

 

 

 

Mar.31

Balance c/d

 

12,50,000

 

 

 

20,00,000

 

 

 

20,00,000

 

 

 

 

 

 

 

 

                   

 

Provision for Depreciation Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

 

 

 

2017

 

 

 

April 01

Machinery

 

2,25,000

April 01

Balance b/d

 

8,00,000

2018

 

 

 

2018

 

 

 

Mar.31

Balance c/d

 

7,00,000

Mar.31

Depreciation (for the year)

 

1,25,000

 

 

 

 

 

 

 

 

 

 

 

9,25,000

 

 

 

9,25,000

 

 

 

 

 

 

 

 

                   

 

Working Notes

1 Calculation of Loss on Sale of Machinery

Particulars

Amount

()

Original cost of Machine Sold

7,50,000

Less: Accumulated Depreciation on Machine Sold, for 3 years, (7,50,000 × 10%  × 3 years)

 

(2,25,000)

Book Value of Machine Sold

5,25,000

Less: Sale Value

(5,00,000)

Loss on Sale of Machine

25,000

 

Page No 14.51:

Question 16:

Following balances appear in the books of X Ltd. as on 1st April, 2018:
 

  
Machinery A/c 5,00,000
Provision for Depreciation A/c 2,25,000

The machinery is depreciated @ 10% p.a. on the Fixed Instalment Method. The accounting year being April-March. On 1st October, 2018, a machinery which was purchased on 1st July, 2015 for ₹ 1,00,000 was sold for ₹ 42,000 plus CGST and SGST @ 6% each and on the same date a new machine was purchased for ₹ 2,00,000 paying IGST @ 12%. Prepare Machinery Account and Provision for Depreciation Account for the year ended 31st March, 2019.

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

April 01

Balance b/d (4,00,000 + 1,00,000)

 

5,00,000

Oct.01

Provision for Depreciation

 

32,500

Oct.01

Bank

 

2,00,000

Oct.01

Bank

 

42,000

 

 

 

 

Oct.01

Profit and Loss(WN1)

 

25,500

        2019      

 

 

 

 

Mar.31

Balance c/d

 

6,00,000

 

 

 

7,00,000

 

 

 

7,00,000

 

 

 

 

 

 

 

 

                   

 

 

Provision for Depreciation Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

Oct.01

Machinery

 

32,500

April 01

Balance b/d

 

2,25,000

2019

 

 

 

2019

 

 

 

Mar.31

Balance c/d

 

2,47,500

Mar.31

Depreciation (WN2)

 

55,000

 

 

 

2,80,000

 

 

 

2,80,000

 

 

 

 

 

 

 

 

                   

 

Working Notes:

1 Calculation of Loss on Sale of Machinery

Particulars

Amount

()

Original cost of Machine Sold

1,00,000

Less: Accumulated Depreciation on Machine Sold, from July 2015 to Oct 01, 2018 (1,00,000 × 10% × 3.25 years)

 

(32,500)

Book Value of Machine Sold

67,500

Less: Sale Value

(42,000)

Loss on Sale of Machine

25,500

 

2 Calculation of Depreciation Charged during the year

Particulars

Amount

()

On 4,00,000 @ 10% (4,00,000 × 10%)

40,000

On 2,00,000 @ 10% for 6 months (2,00,000 × 10% × 6/12)

10,000

On 1,00,000 @ 10% for 6 months (1,00,000 × 10% × 6/12)

5,000

Total

55,000

3. Journal entries for sale and purchase with GST

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
 
 
 
 
 
 
2018
 
 
 
 
 
Oct 1
Bank A/c
Dr.
 
47,040
 
 
  To Machinery A/c
 
 
 
42,000
 
  To Output CGST A/c
  To Output SGST A/c
(Machinery purchased on 1st July, 2014 sold with CGST and SGST @ 6% each.)
 
 
 
2,520
2,520

Oct 1

Machinery A/c
Input IGST A/c
  To Bank A/c
(Machinery purchased with IGST @ 12% paid.)

Dr.
Dr.
 
 

2,00,000
24,000
 



2,24,000
 
 
 
 
 
 



Page No 14.52:

Question 17:

A boiler was purchased from abroad for ₹ 10,000. Shipping and forwarding charges ₹ 2,000, Import duty ₹ 7,000 and expenses of installation amounted to ₹ 1,000.
Calculate the Depreciation for the first three years (separately for each year) @ 10% p.a. on Diminishing Balance Method.

Answer:

Boiler Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

I year

 

 

 

I year

 

 

 

Jan.01

Bank (10,000 + 2,000 + 7,000 + 1,000)

 

20,000

Dec.31

Depreciation

 

2,000

 

 

 

 

 

Balance c/d

 

18,000

 

 

 

20,000

 

 

 

20,000

II year

 

 

 

II year

 

 

 

Jan.01

Balance b/d

 

18,000

Dec.31

Depreciation

 

1,800

 

 

 

 

Dec.31

Balance c/d

 

16,200

 

 

 

18,000

 

 

 

18,000

III year

 

 

 

III year

 

 

 

Jan.01

Balance b/d

 

16,200

Dec.31

Depreciation

 

1,620

 

 

 

 

Dec.31

Balance c/d

 

14,580

 

 

 

16,200

 

 

 

16,200

 

 

 

 

 

 

 

 

 

Page No 14.52:

Question 18:

The original cost of furniture amounted to ₹ 4,000 and it is decided to write off 5% on the original cost as Depreciation at the end of each year. Show the Ledger Account as it will appear during the first four years. Show also how the same account will appear if it was decided to write off 5% p.a. on the diminishing balance of the asset each year.

Answer:

Furniture Account

(Original Cost Method) 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

I year

 

 

 

I year

 

 

 

Jan.01

Bank

 

4,000

Dec.31

Depreciation

 

200

 

 

 

 

Dec.31

Balance c/d

 

3,800

 

 

 

4,000

 

 

 

4,000

II year

 

 

 

II year

 

 

 

Jan.01

Balance b/d

 

3,800

Dec.31

Depreciation

 

200

 

 

 

 

Dec.31

Balance c/d

 

3,600

 

 

 

3,800

 

 

 

3,800

III year

 

 

 

III year

 

 

 

Jan.01

Balance b/d

 

3,600

Dec.31

Depreciation

 

200

 

 

 

 

Dec.31

Balance c/d

 

3,400

 

 

 

3,600

 

 

 

3,600

IV year

 

 

 

IV year

 

 

 

Jan.01

Balance b/d

 

3,400

Dec.31

Depreciation

 

200

 

 

 

 

Dec.31

Balance c/d

 

3,200

 

 

 

3,400

 

 

 

3,400

 

 

 

 

 

 

 

 

                   

Note:

 

Furniture Account

(Diminishing Balance Method) 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

I year

 

 

 

I year

 

 

 

Jan.01

Bank

 

4,000

Dec.31

Depreciation

 

200

 

 

 

 

Dec.31

Balance c/d

 

3,800

 

 

 

4,000

 

 

 

4,000

II year

 

 

 

II year

 

 

 

Jan.01

Balance b/d

 

3,800

Dec.31

Depreciation

 

190

 

 

 

 

Dec.31

Balance c/d

 

3,610

 

 

 

3,800

 

 

 

3,800

III year

 

 

 

III year

 

 

 

Jan.01

Balance b/d

 

3,610

Dec.31

Depreciation

 

181

 

 

 

 

Dec.31

Balance c/d

 

3,429

 

 

 

3,610

 

 

 

3,610

IV year

 

 

 

IV year

 

 

 

Jan.01

Balance b/d

 

3,429

Dec.31

Depreciation

 

171

 

 

 

 

Dec.31

Balance c/d

 

3,258

 

 

 

3,429

 

 

 

3,429

 

 

 

 

 

 

 

 

                   

Note: Depreciation p.a. =

Page No 14.52:

Question 19:

Babu purchased on 1st April, 2017, a machine for ₹ 6,000. On 1st October, 2017, he also purchased another machine for ₹ 5,000. On 1st October, 2018, he sold the machine purchased on 1st April, 2017 for ₹ 4,000.
It was decided that Depreciation @ 10% p.a. was to be written off every year under Diminishing Balance Method.
Assuming the accounts were closed on 31st March every year, show the Machinery Account for the years ended 31st March, 2018 and 2019.

Answer:

Books of Babu

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

 

 

 

2018

 

 

 

Apr. 01

Bank (I)

 

6,000

Mar. 31

Depreciation

 

 

Oct. 01

Bank (II)

 

5,000

 

I

600

 

 

 

 

 

 

 

II (for 6 months)

250

 

850

 

 

 

 

Mar. 31

Balance c/d

 

 

 

 

 

 

 

I

5,400

 

 

 

 

 

 

 

II

4,750

 

10,150

 

 

 

11,000

 

 

 

11,000

2018

 

 

 

2018

 

 

 

Apr. 01

Balance b/d

 

 

Oct. 01

Depreciation (I) (for 6 months)

 

270

 

I

5,400

 

 

Oct. 01

Bank (I)

 

4,000

 

II

4,750

 

10,150

Oct. 01

Profit and Loss (Loss)

 

1,130

        2019      

 

 

 

 

Mar. 31

Depreciation (II)

 

475

 

 

 

 

Mar. 31

Balance c/d (II)

 

4,275

 

 

 

10,150

 

 

 

10,150

 

 

 

 

 

 

 

 

                       

Working Note 

(1) Calculation of profit or loss on sale of machine: 

 

Particulars

Amount ()

Book Value of Machinery Apr. 01, 2018

5,400

Less: Depreciation (for 6 Months)

(270)

Book Value of Machinery on Oct. 01 2018

5,130

Less: Sale

(4,000)

Loss on Sale

1,130

 

Page No 14.52:

Question 20:

X bought a machine for ₹ 25,000 on which he spent ₹ 5,000 for carriage and freight. ₹ 1,000 for brokerage of the middleman, ₹ 3,500 for installation and ₹ 500 for an iron pad. The machine is depreciated @ 10% p.a. on Written Down Value basis. After three years, the machine was sold to Y for ₹ 30,500 and ₹ 500 was paid as commission to the broker through whom the sale was effected. Find out the profit and loss on sale of machine.

Answer:

Books of X

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

I year

 

 

 

I year

 

 

 

Jan.01

Bank (25,000 + 5,000 + 1,000 + 3,500 + 500)

 

35,000

Dec.31

Depreciation

 

3,500

   

 

 

Dec.31

Balance c/d

 

31,500

   

 

35,000

   

 

35,000

II year

 

 

 

II year

 

 

 

Jan.01

Balance b/d

 

31,500

Dec.31

Depreciation

 

3,150

   

 

 

Dec.31

Balance c/d

 

28,350

   

 

31,500

   

 

31,500

III year

 

 

 

III year

 

 

 

Jan.01

Balance b/d

 

28,350

Dec.31

Depreciation

 

2,835

   

 

 

Dec.31

Balance c/d

 

25,515

   

 

28,350

   

 

28,350

IV year

 

 

 

IV year

 

 

 

Jan.01

Balance b/d

 

25,515

Jan.01

Bank (30,500 – 500 brokerage)

 

30,000

Dec.31

Profit and Loss (Profit)

 

4,485

   

 

 
   

 

30,000

   

 

30,000

   

 

     

 

 

 

Page No 14.52:

Question 21:

A company purchased a machinery for ₹ 50,000 on 1st October, 2016. Another machinery costing ₹ 10,000 was purchased on 1st December, 2017. On 31st March, 2019, the machinery purchased in 2016 was sold at a loss of ₹ 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

Oct.01

Bank (I)

 

50,000

Mar.31

Depreciation (for 6 Months)

 

3,750

 

 

 

 

Mar.31

Balance c/d

 

46,250

 

 

 

50,000

 

 

 

50,000

2017

 

 

 

2018

 

 

 

Apr.01

Balance b/d (I)

 

46,250

Mar.31

Depreciation

 

 

Dec.01

Bank (II)

 

10,000

 

I

6,938

 

 

 

 

 

 

 

II

500

 

7,438

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I

39,312

 

 

 

 

 

 

 

II

9,500

 

48,812

 

 

 

56,250

 

 

 

56,250

2018

 

 

 

2019

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

I

39,312

 

 

 

I

5,897

 

 

 

II

9,500

 

48,812

 

II

1,425

 

7,322

 

 

 

 

Mar.31

Bank (I)

 

28,415

 

 

 

 

Mar.31

Profit and Loss (Loss)

 

5,000

 

 

 

 

Mar.31

Balance c/d (II)

 

8,075

 

 

 

48,812

 

 

 

48,812

 

 

 

 

 

 

 

 

                           

Working Note

(1) Calculation of profit or loss on sale of machine:

 

Particulars

Amount

()

Book Value of Machine I on Apr. 01, 2018

39,312

Less: Depreciation (39,312 × 15%)

5,897

Book Value of Machine I on Mar. 31, 2019

33,415

Less: Sale Value

(28,415)

Loss on Sale of Machine I

5,000

Page No 14.52:

Question 22:

On 1st April, 2016, a machinery was purchased for ₹ 20,000. On 1st October, 2017 another machine was purchased for ₹ 10,000 and on 1st April, 2018, one more machine was purchased for ₹ 5,000. The firm depreciates its machinery @ 10% p.a. on the Diminishing Balance Method.
What is the amount of Depreciation for the years ended 31st March, 2017, 2018 and 2019? What will be the balance in Machinery Account as on 31st March, 2019?

Answer:

I. Calculation of Depreciation from April 01, 2016 to March 31, 2019

Depreciation Rate: 10% p.a. on Diminishing Balance Method

Year

Machinery

Date of Purchase

Value 

No. of Months

Amt. of Dep.

Total Dep.

2016-17

M1

April 01, 2015

20,000

12

2,000

2,000

2017-18

M1

April 01, 2015

18,000

(20,000 – 2,000)

12

1,800

 

 

M2

Oct. 01,2016

10,000

6

500

2,300

2018-19

M1

April 01, 2015

16,200

(18,000 – 1,800)

12

1,620

 

 

M2

Oct. 01,2016

9,500

12

950

 

 

M3

April 01, 2017

5,000

12

500

3,070

 

II. Balance in Machinery Account as on March 31, 2019 will be Rs 27,630

Working Notes: Preparation of Machinery Account

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

()

Date

Particulars

Amount

()

2016

 

 

2017

 

 

April 01

Bank A/c (M1)

20,000

March 31

Depreciation A/c (M1)

2,000

 

 

 

March 31

Balance c/d (M1)

18,000

 

 

20,000

 

 

20,000

2017

 

 

2018

 

 

April 01

Balance b/d (M1)

18,000

March 31

Depreciation A/c

 

Oct. 01

Bank A/c (M2)

10,000

 

M1

1,800

 

 

 

 

 

M2 

500

2,300

 

 

 

March 31

Balance c/d

 

 

 

 

 

M1

16,200

 

 

 

 

 

M2

9,500

25,700

 

 

28,000

 

 

28,000

2018

 

 

2019

 

 

April 01

Balance b/d

 

March 31

Depreciation A/c

 

 

M1

16,200

 

 

M1

1,620

 

 

M2

9,500

25,700

 

M2

950

 

April 01

Bank A/c (M3)

5,000

 

M3

500

3,070

 

 

 

March 31

Balance c/d

 

 

 

 

 

M1

14,580

 

 

 

 

 

M2

8,550

 

 

 

 

 

M3

4,500

27,630

 

 

30,700

 

 

30,700

 

 

 

 

 

 

                       

Note: Since the question does not specify to prepare the Machinery Account, thus, it is optional to prepare this account.



Page No 14.53:

Question 23:

M/s. P & Q purchased machinery for ₹ 40,000 on 1st October, 2016. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January, 2019, one-fourth of the machinery was found unsuitable and disposed off for ₹ 5,600. On the same date new machinery at a cost of ₹ 15,000 was purchased. Write up the Machinery account for the years ended 31st March, 2017, 2018 and 2019. Accounts are closed on 31st March each year.

Answer:

Machinery Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

Oct. 01

Bank

 

 

Mar.31

Depreciation

 

 

 

I (3/4)

30,000

 

 

 

I (3/4) for 6 months

1,500

 

 

 

I(1/4)

10,000

 

40,000

 

I (1/4) for 6 months

500

 

2,000

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I (3/4)

28,500

 

 

 

 

 

 

 

I (1/4)

9,500

 

38,000

 

 

 

40,000

 

 

 

40,000

2017

 

 

 

2018

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

I (3/4)

28,500

 

 

 

I (3/4)

2,850

 

 

 

I (1/4)

9,500

 

38,000

 

I (1/4)

950

 

3,800

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I (3/4)

25,650

 

 

 

 

 

 

 

I (1/4)

8,550

 

34,200

 

 

 

38,000

 

 

 

 

38,000

2018

 

 

 

2019

 

 

 

Apr.01

Balance b/d

 

 

Jan.31

Depreciation I (1/4)(for 10 Months)

 

713

 

I (3/4)

25,650

 

 

Jan.31

Bank I(1/4)

 

5,600

2019

I (1/4)

8,550

 

34,200

 

Profit and Loss (Loss)

 

2,237

Jan.31

Bank (II)

 

15,000

Mar.31

Depreciation

 

 

 

 

 

 

 

I (3/4)

2,565

 

 

 

 

 

 

 

II (for 2 months)

250

 

2,815

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I (3/4)

23,085

 

 

 

 

 

 

 

II

14,750

 

37,835

 

 

 

49,200

 

 

 

 

49,200

 

 

 

 

 

 

 

 

                       

 

Working Note

(1)Calculation of Profit or Loss on Sale of Machine I (1/4):

Particulars

Amount ()

Book Value of Machine (I)(1/4) on Apr. 01, 2018

8,550

Less: Depreciation for 10 Months

(713)

Book Value of Machine (I)(1/4) on Jan. 31 2019

7,837

Less: Sale Value

(5,600)

Loss on Sale of Machine I(1/4)

2,237

 

Page No 14.53:

Question 24:

On 1st October, 2015, Meenal Sharma bought a machine for ₹ 25,000 on which he spent ₹ 5,000 for carriage and freight; ₹ 1,000 for brokerage of the middle-man, ₹ 4,000 for installation. The machine is depreciated @ 10% p.a. on written down value basis. On 31st March, 2018 the machine was sold to Deepa for ₹ 30,500 and ₹ 500 was paid as commission to broker through whom the sales was effected. Find out the profit or loss on sale of machine if accounts are closed on 31st March, every year.

Answer:

Machinery Account    

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015

 

 

 

2016

 

 

 

Oct 01

Bank (25,000+5,000+1,000+4,000)

 

35,000

Mar.31

Depreciation (for 6 months)

 

1,750

 

 

 

 

Mar.31

Balance c/d

 

33,250

 

 

 

35,000

 

 

 

35,000

2016

 

 

 

2017

 

 

 

Apr.01

Balance b/d

 

33,250

Mar.31

Depreciation

 

3,325

 

 

 

 

Mar.31

Balance c/d

 

29,925

 

 

 

33,250

 

 

 

33,250

2017

 

 

 

2018

 

 

 

Apr.01

Balance b/d

 

29,925

Mar.31

Depreciation

 

2,993

2018
Mar.31


Profit and Loss A/c (Profit on Sale) (WN1)

 

3,068

Mar.31

Bank A/c (30,500 – 500)

 

30,000

 

 

 

32,993

 

 

 

32,993

 

 

 

 

 

 

 

 

                   

Working Note:

(1) Calculation of Profit or Loss on sale of Machine I:

Particulars

Amount

()

Book Value of Machine on Apr. 01, 2017

29,925

Less: Depreciation for the year

(2,993)

Book Value of Machine I on Mar. 31, 2018

26,932

Less: Sale Value (30,500 – 500)

(30,000)

Profit on Sale

3,068

 

Page No 14.53:

Question 25:

A company purchased on 1st July, 2015 machinery costing ₹ 30,000. It further purchased machinery on 1st January, 2016 costing ₹ 20,000 and on 1st October, 2016 costing ₹ 10,000. On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for ₹ 3,000. The company follows financial year as accounting year.
Show how the Machinery Account would appear in the books of company if depreciation is charged @ 10% p.a. on Written Down Value Method.

Answer:

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

(Rs)

Date

Particulars

J.F.

Amount

(Rs)

2015

 

 

 

2016

 

 

 

July 01

Bank

 

 

Mar.31

Depreciation

 

 

 

I(2/3)

20,000

 

 

 

I(2/3)

1,500

 

 

2016

I(1/3)

10,000

 

30,000

 

I(1/3)

750

 

 

Jan.01

Bank (II)

 

20,000

 

II

500

 

2,750

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I(2/3)

18,500

 

 

 

 

 

 

 

I(1/3)

9,250

 

 

 

 

 

 

 

II

19,500

 

47,250

 

 

 

50,000

 

 

 

 

50,000

2016

 

 

 

2017

 

 

 

Apr 01

Balance b/d

 

 

Mar 31

Depreciation

 

 

 

I(2/3)

18,500

 

 

 

I(2/3)

1,850

 

 

 

I(1/3)

9,250

 

 

 

I(1/3)

925

 

 

 

II

19,500

 

47,250

 

II

1,950

 

 

Oct 01

Bank (III)

 

10,000

 

III

500

 

5,225

 

 

 

 

Mar 31

Balance c/d

 

 

 

 

 

 

 

I(2/3)

16,650

 

 

 

 

 

 

 

I(1/3)

8,325

 

 

 

 

 

 

 

II

17,550

 

 

 

 

 

 

 

III

9,500

 

52,025

 

 

 

57,250

 

 

 

57,250

2017

 

 

 

2017

 

 

 

Apr.01

Balance b/d

 

 

Apr.01

Bank (I)(1/3)

 

3,000

 

I(2/3)

16,650

 

 

Apr.01

Profit and Loss (Loss)

 

5,325

 

I(1/3)

8,325

 

 

Mar.31,

Depreciation

 

 

 

II

17,550

 

 

2018

I(2/3)

1,665

 

 

 

III

9,500

 

52,025

 

II

1,755

 

 

 

 

 

 

 

III

950

 

4,370

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I(2/3)

14,985

 

 

 

 

 

 

 

II

15,795

 

 

 

 

 

 

 

III

8,550

 

39,330

 

 

 

52,025

 

 

 

 

52,025

 

 

 

 

 

 

 

 

                           

 

Working Note:

(1) Calculation of Profit or Loss on Sale of Plant I(1/3):

Particulars

Amount (Rs)

Book Value of Plant I (1/3) as on Apr 01, 2017

8,325

Less: Sale Value

(3,000)

Loss on Sale

5,325

 

Page No 14.53:

Question 26:

Astha Engineering Works purchased a machine on 1st July, 2015 for ₹ 1,80,000 and spent ₹ 20,000 on its installation.
On 1st April, 2016, if purchased another machine for ₹ 2,40,000. On 1st October, 2017, the machine purchased on 1st July, 2015 was sold for ₹ 1,45,000 plus CGST and SGST @ 6% each. On 1st January, 2018, another machine was purchased for ₹ 4,00,000 plus IGST @ 12%.
Prepare the Machinery Account for the years ended 31st March, 2016 to 2018 after charging Depreciation @ 10% p.a. by Diminishing Balance Method. Accounts are closed on 31st March every year.

Answer:

Book of Astha Engineering Works 

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2015-16

 

 

 

2015-16

 

 

 

July 01

Bank (I) (1,80,000 + 20,000)

 

2,00,000

Mar.31

Depreciation (for 9 months)

 

15,000

 

 

 

 

Mar.31

Balance c/d

 

1,85,000

 

 

 

2,00,000

 

 

 

2,00,000

2016-17

 

 

 

2016-17

 

 

 

Apr.01

Balance b/d (I)

 

1,85,000

Mar.31

Depreciation

 

 

Apr.01

Bank (II)

 

2,40,000

 

I

18,500

 

 

 

 

 

 

 

II

24,000

 

42,500

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I

1,66,500

 

 

 

 

 

 

 

II

2,16,000

 

3,82,500

 

 

 

4,25,000

 

 

 

4,25,000

2017-18

 

 

 

2017-18

 

 

 

Apr.01

Balance b/d

 

 

Oct. 01

Depreciation (I) (for 6 months)

 

8,325

 

I

1,66,500

 

 

Oct. 01

Bank (I)

 

1,45,000

 

II

2,16,000

 

3,82,500

Oct. 01

Profit and Loss (Loss)

 

13,175

Jan.01

Bank (III)

 

4,00,000

Mar.31

Depreciation

 

 

 

 

 

 

 

II

21,600

 

 

 

 

 

 

 

III (for 3 months)

10,000

 

31,600

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

II

1,94,400

 

 

 

 

 

 

 

III

3,90,000

 

5,84,400

 

 

 

7,82,500

 

 

 

7,82,500

 

 

 

 

 

 

 

 

                         

 

Working Note:

(1) Calculation of profit or loss on sale of Machine I:

 

Particulars

Amount ()

Book Value of as on Apr. 01, 2017

1,66,500

Less: Depreciation (for 6 Months)

(8,325)

Book Value on Oct 01, 2017

1,58,175

Less: Sale Value

(1,45,000)

Loss on Sale

13,175

(2) Journal entry for purchase with GST

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2018
 
 
 
 
 
Jan 01
Machinery A/c
Dr.
 
4,00,000
 
 
Input IGST A/c
Dr.
 
48,000
 
 
    To Bank A/c
 
 
 
4,48,000
 
(Machinery purchased with IGST @ 12% paid)
 
 
 
 
 
 
 
 
 
 

Page No 14.53:

Question 27:

Following balances appear in the books of M/s. Amrit as on 1st April, 2018:
 

    
2018    
1st April Machinery A/c 60,000
  Provision for Depreciation A/c 36,000

On 1st April, 2018, they decided to dispose off a machinery for ₹ 8,400 which was purchased on 1st April, 2014 for ₹ 16,000.
You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ended 31st March, 2019. Depreciation was charged at 10% p.a on Cost following Straight Line Method.

Answer:

Books of M/s. Amrit

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

April 01

Balance b/d (44,000 + 16,000)

 

60,000

April 01

Machinery Disposal

 

16,000

 

 

 

 

2019

 

 

 

 

 

 

 

Mar.31

Balance c/d

 

44,000

 

 

 

60,000

 

 

 

60,000

 

 

 

 

 

 

 

 

                   

 

Provision for Depreciation Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

April 01

Machinery Disposal (4 years)

 

6,400

April 01

Balance b/d

 

36,000

2019

 

 

 

2019

 

 

 

Mar.31

Balance c/d

 

34,000

Mar.31

Depreciation (on Machine costing Rs 44,000)

 

4,400

 

 

 

40,400

 

 

 

40,000

 

 

 

 

 

 

 

 

                   

 

Machinery Disposal Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

April 01

Machinery

 

16,000

April 01

Provision for Depreciation

 

6,400

 

 

 

 

2019

 

 

 

 

 

 

 

Mar.31

Bank (Sale)

 

8,400

 

 

 

 

 

Profit and Loss (Loss)

 

1,200

 

 

 

16,000

 

 

 

16,000

 

 

 

 

 

 

 

 

                   

 

Working Note

1. Calculation of profit or loss on Machine Sold:

Particulars

Amount

()

Original Cost of Machine Sold on April 01, 2014

16,000

Less: Accumulated Depreciation on Machine Sold (1,600 × 4)

(6,400)

Book Value of April 01, 2018

9,600

Less: Sale Value

(8,400)

Loss on Sale

1,200

 



Page No 14.54:

Question 28:

On 1st October, 2011, X Ltd. purchased a machinery for ₹ 2,50,000. A part of machinery which was purchased for ₹ 20,000 on 1st October, 2011 became obsolete and was disposed off on 1st January, 2014 (having a book value ₹ 17,100 on 1st April, 2013) for ₹ 2,000. Depreciation is charged @ 10% annually on written down value. Prepare Machinery Disposal Account and also show your workings. The books being closed on 31st March of every year.

Answer:

Books of X Ltd.

Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

(Rs)

Date

Particulars

J.F.

Amount

(Rs)

2011

 

 

 

2012

 

 

 

Oct 01

Bank

 

 

Mar.31

Depreciation

 

 

 

I (part 1)

2,30,000

 

 

 

I (part 1) (for 6 months)

11,500

 

 

 

I (part 2)

20,000

 

2,50,000

 

I (part 2) (for 6 months)

1,000

 

12,500

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I (part 1)

2,18,500

 

 

 

 

 

 

 

I (part 2)

19,000

 

2,37,500

 

 

 

2,50,000

 

 

 

 

2,50,000

2012

 

 

 

2013

 

 

 

Apr.01

Balance b/d

 

 

Mar.31

Depreciation

 

 

 

I (part 1)

2,18,500

 

 

 

I (part 1)

21,850

 

 

 

I (part 2)

19,000

 

2,37,500

 

I (part 2)

1,900

 

23,750

 

 

 

 

Mar.31

Balance c/d

 

 

 

 

 

 

 

I (part 1)

1,96,650

 

 

 

 

 

 

 

I (part 2)

17,100

 

2,13,750

 

 

 

2,37,500

 

 

 

 

2,37,500

2013

 

 

 

2014

 

 

 

Apr.01

Balance b/d

 

 

Jan.01

Depreciation (I) (part 2) (for 9 Months)

 

1,283

 

I (part 1)

1,96,650

 

 

Jan.01

Bank (I) (part 2)

 

2,000

 

I (part 2)

17,100

 

2,13,750

Jan.01

Profit and Loss (Loss)

 

13,817

 

 

 

 

Mar.31

Depreciation I (part 1)

 

19,665

 

 

 

 

Mar.31

Balance c/d

 

1,76,985

 

 

 

2,13,750

 

 

 

2,13,750

 

 

 

 

 

 

 

 

 

Page No 14.54:

Question 29:

Sharma & Co. whose books are closed on 31st March, purchased a machinery for ₹ 1,50,000 on 1st April, 2016, Additional machinery was acquired for ₹ 50,000 on 1st October, 2016. Certain machinery which was purchased for ₹ 50,000 on 1st October, 2016 was sold for ₹ 40,000 on 30th September, 2018.

Prepare the Machinery Account and Accumulated Depreciation Account for all the years up to the year ended 31st March, 2019. Depreciation is charged @ 10% p.a. on Straight Line Method. Also, show the Machinery Disposal Account.

Answer:

Books of Sharma & Co.

Machinery Account 

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2016

 

 

 

2017

 

 

 

Apr.01

Bank (I)

 

1,50,000

 

 

 

 

Oct 01

Bank (II)

 

50,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

2,00,000

 

 

 

2,00,000

2017

 

 

 

2018

 

 

 

Apr.01

Balance b/d

 

2,00,000

Mar.31

Balance c/d

 

2,00,000

 

 

 

 

 

 

 

 

 

 

 

2,00,000

 

 

 

2,00,000

2018

 

 

 

2018

 

 

 

Apr.01

Balance b/d

 

2,00,000

Sep 30

Machinery Disposal A/c

 

50,000

 

 

 

 

Mar.31,2019

Balance c/d

 

1,50,000

 

 

 

2,00,000

 

 

 

2,00,000

 

 

 

 

 

 

 

 

                   

 

Accumulated Depreciation Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

 

 

 

2017

 

 

 

Mar.31

Balance c/d

 

 

Mar. 31

Depreciation

 

 
 

I

15,000

 

   

I

15,000

 

 
 

II

2,500

 

17,500

 

II (for 6 months)

2,500

 

17,500

 

 

 

17,500

 

 

 

17,500

2018

 

 

 

2017

 

 

 

Mar.31

Balance c/d

 

 

Apr. 01

Balance b/d

 

 

 

I

30,000

 

 

 

I

15,000

 

 

 

II

7,500

 

37,500

2018

II

2,500

 

17,500

 

 

 

 

Mar. 31

Depreciation

 

 

 

 

 

 

 

I

15,000

 

 

 

 

 

 

 

II

5,000

 

20,000

 

 

 

37,500

 

 

 

 

37,500

2018

 

 

 

2018

 

 

 

Sep 30

Machinery disposal (II)

 

10,000

Apr. 01

Balance b/d

 

 

Mar.31, 2019

Balance c/d (I)

 

45,000

 

I

30,000

 

 

 

 

 

 

 

II

7,500

 

37,500

 

 

 

 

Sep 30

Depreciation (II)

 

2,500

 

 

 

 

Mar. 31, 2019

Depreciation (I)

 

15,000

 

 

 

55,000

 

 

 

55,000

 

 

 

 

 

 

 

 

                         

 

Machinery Disposal Account

Dr.

 

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2018

 

 

 

2018

 

 

 

Sep 30

Machinery

 

50,000

Sep 30

Accumulated Depreciation

 

10,000

 

 

 

 

Sep 30

Bank

 

40,000

 

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

                   

 

Working note

        1. Calculation of Profit or Loss on sale of Machine II:

Particulars

Amount ()

Original Cost Oct 01, 2016

50,000

Less: Accumulated Depreciation

(10,000)

Book Value on Sept 30, 2018

40,000

Less: Sale Value

(40,000)

Profit / Loss

NIL



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