DK Goel Solutions Chapter 16 Depreciation

DK Goel Accountancy Class 11 Solutions Chapter 16 Depreciation which is outlined by expert Accountancy teachers from the latest version of DK Goel Class 11 Accountancy books. We at BYJU’S provide DK Goel Solutions to assist students to comprehend all the theories in particular. There are numerous concepts in Accountancy, but the concepts of Trial Balance, Depreciation and Bank Reconciliation Statement (BRS) are required.

DK Goel Accountancy Class 11 Solutions – Chapter 16

Practical Questions

Question 1

On 1st April, 2007, a limited company purchased a Machine for ₹ 1,90,000 and spent ₹ 10,000 on its installation. At the date of purchase, it was estimated that the scrap value of the machine would be ₹ 50,000 at the end of the sixth year.

Give Machine Account and Depreciation A/c in the books of the Company for 4 years after providing depreciation by Fixed Installment Method. The books are closed on 31st March every year.

Solution:

Dr. Machinery Account

Cr.

Date

2017

Particulars

Amount ₹

Date

2017

Particulars

Amount ₹

April 1

Bank A/c (1,90,000 + 10,000)

2,00,000

March 31

Depreciation A/c

25,000

March 31

Balance c/d

1,75,000

2,00,000

2,00,000

2008

2009

April 1

Balance b/d

1,75,000

March 31

Depreciation A/c

25,000

March 31

Balance c/d

1,50,000

1,75,000

1,75,000

2009

2010

April 1

Balance b/d

1,50,000

March 31

Depreciation A/c

25,000

March 31

Balance c/d

1,25,000

1,50,000

1,50,000

2010

2011

April 1

Balance b/d

1,25,000

March 31

Depreciation A/c

25,000

March 31

Balance c/d

1,00,000

1,25,000

1,25,000

Dr. Depreciation Account

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2008

2008

March 31

Machinery A/c

25,000

March 31

Profit and Loss A/c

25,000

25,000

25,000

2009

2009

March 31

Machinery A/c

25,000

March 31

Profit and Loss A/c

25,000

25,000

25,000

2010

2010

March 31

Machinery A/c

25,000

March 31

Profit and Loss A/c

25,000

25,000

25,000

2011

2011

March 31

Machinery A/c

25,000

March 31

Profit and Loss A/c

25,000

25,000

25,000

Working Note: Evaluation of Depreciation

Annual Depreciation = \(\frac{Cost\, of\, Asset-Scrap\, Value}{Estimated\, Useful\, Life\, of\, Asset}\)

= \(\frac{2,00,000\, \left ( 1,90,000+10,000 \right )\, -\, 50,000}{6}\)

= ₹ 25,000

Rate of Depreciation = \(\frac{Amount\, of\, Depreciation}{Total\, Cost\, of\, Asset} X 100\)

= \(\frac{25,000}{2,00,000} X 100\)

= 12.5 %

Question 2

On 1st April, 2009, a Company bought Plant and Machinery costing ₹ 68,000. It is estimated that its working life is 10 years, at the end of which it will fetch ₹ 8,000. Additions are made on 1st April, 2010 to the value of ₹ 40,000 (Residual value ₹ 4,000). More additions are made on Oct. 1, 2011 to the value of ₹ 9,800 (Break up value ₹ 800). The working life of both the additional Plant and machinery is 20 years.

Show the Plant and Machinery account for the first four years, if depreciation is written off according to Straight Line Method. The accounts are closed on 31st March every year.

Solution:

Dr.

Plant & Machinery Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount (Rs)

2009

2010

April 1

Bank A/c (P1)

68,000

March 31

Depreciation A/c

6,000

March 31

Balance c/d

62,000

68,000

68,000

2010

2011

April 1

Balance b/d (P1)

62,000

March 31

Depreciation A/c

Apr. 01

Bank A/c (P2)

40,000

P1

6,000

P2

1,800

7,800

March 31

Balance c/d

P1

56,000

P2

38,200

94,200

1,02,000

1,02,000

2011

2012

April 1

Balance b/d

March 31

Depreciation A/c

P1

56,000

P1

6,000

P2

38,200

94,200

P2

1,800

Oct. 1

Bank A/c (P3)

9,800

P3 (for 6 months)

225

8,025

March 31

Balance c/d

P1

50,000

P2

36,400

P3

9,575

95,975

1,04,000

1,04,000

2012

2013

Apr. 01

Balance b/d

March 31

Depreciation A/c

P1

50,000

P1

6,000

P2

36,400

P2

1,800

P3

9,575

95,975

P3

450

8,250

March 31

Balance c/d

P1

44,000

P2

34,600

P3

9,125

87,725

95,975

95,975

Working Note : Evaluation of Depreciation

Annual Depreciation: \(\frac{Cost\, of\, Asset-Scrap\, Value}{Estimated\, Useful\, Life\, of\, Asset}\)

P1 = \(\frac{68,000-8,000}{10}\)

= ₹ 6,000

P2 = \(\frac{40,000-4,000}{20}\)

= ₹ 1,800

P3 = \(\frac{9,800-800}{20}\)

= ₹ 450

Question 3

Chandra Ltd. purchased a second-hand machine for ₹ 8,000 plus CGST and SGST @ 6% each on 1st July, 2015. They spent ₹ 3,500 on its overhaul and installation.

Depreciation is written off 10% p.a. on the original cost. On 30th September, 2018, the machine was found to be unsuitable and sold for ₹ 6,500. Prepare the Machinery A/c for four years assuming that accounts are closed on 31st March.

Solution:

Dr.

Machinery Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2015

2016

July 1

Bank A/c (8,000 + 3,500)

11,500

March 31

Depreciation A/c (for 9 months)

863

Balance c/d

10,637

11,500

11,500

2016

2017

April 1

Balance b/d

10,637

March 31

Depreciation A/c

1,150

Balance c/d

9,487

10,637

10,637

2017

2018

April 1

Balance b/d

9,487

March 31

Depreciation A/c

1,150

Balance c/d

8,337

9,487

9,487

2018

2018

April 1

Balance b/d

8,337

September 30

Depreciation A/c

575

Bank A/c (Sale)

6,500

Profit and Loss A/c (Sale Loss)

1,262

8,337

8,337

Working Notes: Evaluation of Profit or Loss on Sale

Particulars

Amount ₹

Value of Machinery on 1st April, 2018

8,337

Less: 6 months depreciation

575

Value of Machinery on 30th September, 2018

7,762

Less: Sale Value

6,500

Loss on Sale

1,262

Question 4

A Ltd. purchased a machine for ₹ 5,00,000 on 1st April, 2012. Further addition were made on 1st October 2012 and on 1st July 2013 for ₹ 4,00,000 and ₹ 3,00,000 respectively. On 1st January, 2015, 1st machine was sold for ₹ 2,85,000 and new machine was purchased for ₹ 6,00,000.

Prepare Machine A/c for three years ending 31st March, 2015 if depreciation is to be charged @ 10% p.a. on straight-line basis.

Solution:

Dr.

Machinery Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2013

April 1

Bank A/c (M1)

5,00,000

March31

Depreciation A/c (M1)

50,000

Oct1

Bank A/c (M2)

4,00,000

Depreciation A/c (M2)

20,000

March 31

Balance c/d

M1

4,50,000

M2

3,80,000

8,30,000

9,00,000

9,00,000

2013

2014

April 1

Balance b/d

March 31

Depreciation A/c

M1

4,50,000

M1

50,000

M2

3,80,000

8,30,000

M2

40,000

July 1

Bank A/c (M3)

3,00,000

M3

22,500

1,12,500

March 31

Balance c/d

M1

4,00,000

M2

3,40,000

M3

2,77,500

10,17,500

11,30,000

11,30,000

2014

2015

April 1

Balance b/d

Jan.1

Depreciation A/c (for 9 months of M1)

37,500

M1

4,00,000

Bank A/c (M1 Sale)

2,85,000

M2

3,40,000

Profit and Loss A/c (Sale Loss)

77,500

M3

2,77,500

10,17,500

March 31

Depreciation on-

2015

M2

40,000

Jan 1

Bank A/c (M4)

6,00,000

M3

30,000

M4

15,000

85,000

March 31

Balance c/d

M2

3,00,000

M3

2,47,500

M4

5,85,000

11,32,500

16,17,500

16,17,500

Question 5

On 1st January, 2006, A Ltd. Purchased a machine for ₹ 2,40,000 and spent ₹ 10,000 on its erection. On 1st July, 2006 an additional machinery costing ₹ 1,00,000 was purchased. On 1st July, 2008 the machine purchased on 1st January, 2006 was sold for ₹ 1,43,000 and on the same date, a new machine was purchased at a cost of ₹ 2,00,000.

Show the Machinery Account for the first three calendar years after charging depreciation at 5% by the Straight Line Method.

Solution:

Dr.

Machinery Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2006

2006

Jan. 1

Bank A/c (M1) (2,40,000 + 10,000)

2,50,000

Dec. 31

Depreciation A/c

2011

M1

12,500

July 1

Bank A/c (M2)

1,00,000

M2 (for 6months)

2,500

15,000

Balance c/d

M1

2,37,500

M2

97,500

3,35,000

3,50,000

3,50,000

2007

2007

Jan.1

Balance b/d

Dec. 31

Depreciation A/c

M1

2,37,500

M1

12,500

M2

97,500

3,35,000

M2

5,000

17,500

Balance c/d

M1

2,25,000

M2

92,500

3,17,500

3,35,000

3,35,000

2008

2008

Jan. 1

Balance b/d

July 1

Depreciation A/c (M1)

6,250

M1

2,25,000

Bank A/c (Sale of M1 )

1,43,000

M2

92,500

3,17,500

Profit and Loss A/c (M1 sale loss)

75,750

July 1

Bank A/c (M3)

2,00,000

Dec. 31

Depreciation A/c

M2

5,000

M3 (for 6 months)

5,000

10,000

Balance c/d

M2

87,500

M3

1,95,000

2,82,500

5,17,500

5,17,500

Working Note: Evaluation of M1 Profit or Loss on Sale

Particulars

Value of Machinery on1st January, 2008

2,25,000

Less: 6 months depreciation

6,250

Value of Machinery on 1st July, 2008

28,750

Less: Sale Value

1,43,000

Loss on Sale

75,750

Question 6

A company purchased on 1st April, 2009, a machinery for ₹ 80,000. On 1st October, 2010, it purchased another machine for ₹ 50,000 and on 1st October, 2011, it sold off the first machine purchased in 2009 for ₹ 23,000. Depreciation was provided on the machinery at the rate of 20% p.a. on the original cost annually.

Give the Machinery Account for four years commencing from 1st April, 2009.

Accounts are closed on 31st March every year.

Solution:

Dr.

Machinery Account Cr.

Date

Particulars

Amount

Date

Particulars

Amount

2009

2010

April 1

Bank A/c (M1)

80,000

March 31

Depreciation A/c

16,000

March 31

Balance c/d

64,000

80,000

80,000

2010

2011

April 1

Balance b/d

64,000

March 31

Depreciation A/c

October 1

Bank A/c (M2)

50,000

M1

16,000

M2(for 6 months)

5,000

21,000

March 31

Balance c/d

M1

48,000

M2

45,000

93,000

1,14,000

1,14,000

2011

2011

April 1

Balance b/d

October1

Depreciation A/c (M1)

8,000

M1

48,000

Bank A/c (M1 Sale)

23,000

M2

45,000

93,000

Profit and Loss A/c (M1 sale loss)

17,000

2012

March 31

Depreciation A/c

10,000

Balance c/d

35,000

93,000

93,000

2012

2013

April 1

Balance b/d

35,000

March 31

Depreciation A/c

10,000

March 31

Balance c/d

25,000

35,000

35,000

Working Note: Evaluation of M1 Profit or Loss on Sale

Particulars

Amount

Value of Machinery on Apr. 01, 2011

48,000

Less: Depreciation for 6 months

8,000

Value of Machinery on Oct. 01, 2011

40,000

Less: Sale Value

23,000

Loss on Sale

17,000

Question 7

Bhushan & Company purchased a Machinery on 1st April, 2009, for ₹ 54,000 and spent ₹ 6,000 on its installation. On the 1st of December, 2010, it purchased another machine for ₹ 30,000.

On 30th June 2011, the first machine purchased on 1st April, 2009, is sold for ₹ 36,000 and on the same date it purchased new machinery for ₹ 80,000.

On December 1, 2012, the second machine (purchased on December 1, 2010) was also sold off for ₹ 26,000.

Depreciation was provided on machinery @ 10% p.a. on Original Cost Method annually o 31st March. Give the machinery account for four years.

Solution:

Dr. Machinery

Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2010

April 1

Bank A/c (M1) (54,000 + 6,000)

60,000

March 31

Depreciation A/c

6,000

March 31

Balance c/d

54,000

60,000

60,000

2010

2011

April 1

Balance b/d

54,000

March 31

Depreciation A/c

Dec. 1

Bank A/c (M2)

30,000

M1

6,000

M2 (for 4 months)

1,000

7,000

March 31

Balance c/d

M1

48,000

M2

29,000

77,000

84,000

84,000

2011

2011

April 1

Balance b/d

June 30

Depreciation A/c (M1)

1,500

M1

48,000

Bank A/c (Sale of M1)

36,000

M2

29,000

77,000

Profit and Loss A/c (M1 sale loss)

10,500

June 30

Bank A/c (M3)

80,000

2012

March 31

Depreciation A/c

M2

3,000

M3 (for 9 months)

6,000

9,000

Balance c/d

M2

26,000

M3

74,000

1,00,000

1,57,000

1,57,000

2012

2012

April 1

Bank A/c

Dec. 01

Depreciation A/c (M2)

2,000

M2

26,000

Bank A/c (Sale of M2)

26,000

M3

74,000

1,00,000

2013

Dec.1

Profit and Loss A/c (M2 profit sale)

2,000

March 31

Depreciation A/c (M3)

8,000

Balance c/d

66,000

1,02,000

1,02,000

Working Note 1 : Evaluation of M1 of profit or loss on sale

Particulars

Value of Machinery on 1st April, 2011

48,000

Less: 3 months depreciation

1,500

Value of Machinery on 30th Jun, 2011

46,500

Less: Sale Value

36,000

Loss on Sale

10,500

Working Note 2: Evaluating M2 profit or loss on the sale.

Particulars

Value of Machinery on 1st Apr.il, 2012

26,000

Less: 8 months depreciation

2,000

Value of Machinery on 1st December, 2012

24,000

Less: Sale Value

26,000

Profit on Sale

2,000

Question 8

On 1st October, 2009, Raj & Co. purchased machinery worth ₹ 40,000. On 1st October, 2011, it buys additional machinery worth ₹ 10,000. On 30th September, 2012, half of the machinery purchased on 1st Oct., 2009, is sold for ₹ 8,200. The company writes off 10 per cent p.a. on the original cost. The accounts are closed every year on 31st March.

Show the Machinery Account for four years.

Solution:

Dr. Machinery

Account Cr.

Date

Particulars

Amount (Rs)

Date

Particulars

Amount (Rs)

2009

2010

October 1

Bank A/c

March 31

Depreciation A/c

M1

20,000

M1 (for 6 months)

1,000

M2

20,000

40,000

M2 (for 6 months)

1,000

2,000

Balance c/d

M1

19,000

M2

19,000

38,000

40,000

40,000

2010

2011

April 1

Balance b/d

March 31

Depreciation A/c

M1

19,000

M1

2,000

M2

19,000

38,000

M2

2,000

4,000

Balance c/d

M1

17,000

M2

17,000

34,000

38,000

38,000

2011

2012

April 1

Balance b/d

March 31

Depreciation A/c

M1

17,000

M1

2,000

M2

17,000

34,000

M2

2,000

October 1

Bank A/c (M3)

10,000

M3 (for 6 months)

500

4,500

March 31

Balance c/d

M1

15,000

M2

15,000

M3

9,500

39,500

44,000

44,000

2012

2012

April 1

Balance b/d

Sept. 30

Depreciation A/c (M1)

1,000

M1

15,000

Bank A/c (Sale of M1)

8,200

M2

15,000

Profit and Loss A/c (Loss on Sale of M1)

5,800

M3

9,500

39,500

2013

March 31

Depreciation A/c

M2

2,000

M3

1,000

3,000

Balance c/d

M2

13,000

M3

8,500

21,500

39,500

39,500

Working Note: Evaluation of M1 profit and loss on sale

Particulars

Value of Machinery on 1st April, 2012

15,000

Less: 6 months depreciation

1,000

Value of Machinery 30th September 2012

14,000

Less: Sale Value

8,200

Loss on Sale

5,800

Note: The purchase of plant and machinery purchased on 1st October, 2009 can be divided into two parts (M1 and M2)

Therefore, M1 was sold at ₹ 8,200

M2, is still in the business.

Question 9

On 1st April, 2010, Plant and Machinery was purchased for ₹ 1,20,000. New machinery was purchased on 1st Oct., 2010, for ₹ 50,000 and on 1st July, 2011, for ₹ 25,000.

On 1st January, 2013, a machinery of the original value of ₹ 20,000 which was included in the machinery purchased on 1st April, 2010, was sold for ₹ 6,000. Prepare Plant & Machinery A/c for three years after providing depreciation at 10% p.a. on Straight Line Method. Accounts are closed on 31st March every year.

Solution:

Dr. Plant &

Machinery Account Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

April 1

Bank A/c

March 31

Depreciation A/c

M1

20,000

M1

2,000

M2

1,00,000

1,20,000

M2

10,000

October1

Bank A/c (M3)

50,000

M3(6 months)

2,500

14,500

March 31

Balance c/d

M1

18,000

M2

90,000

M3

47,500

1,55,500

1,70,000

1,70,000

2011

2012

April 1

Balance b/d

March 31

Depreciation A/c

M1

18,000

M1

2,000

M2

90,000

M2

10,000

M3

47,500

1,55,500

M3

5,000

July 1

Bank A/c (M4)

25,000

M4(9 months)

1,875

18,875

March 31

Balance c/d

M1

16,000

M2

80,000

M3

42,500

M4

23,125

1,61,625

1,80,500

1,80,500

2012

2013

April 1

Balance b/d

January 01

Depreciation A/c (M1)

1,500

M1

16,000

Bank A/c (M1 sale)

6,000

M2

80,000

Profit and Loss A/c (M1 Loss Sale)

8,500

M3

42,500

March 31

Depreciation A/c

M4

23,125

1,61,625

M2

10,000

M3

5,000

M4

2,500

17,500

March 31

Balance c/d

M2

70,000

M3

37,500

M4

20,625

1,28,125

1,61,625

1,61,625

Working Note: Evaluate M1 sale Profit or Loss

Particulars

Value of Machinery on 1st April, 2012

16,000

Less: Depreciation for 9 months

1,500

Value of Machinery on 1st January, 2013

14,500

Less: Sale Value

6,000

Loss on Sale

8,500

Note: The purchase of plant and machinery purchased on 1st April, 2010can be divided into two parts (M1 and M2)

Therefore, M1: ₹ 20,000 (sold for Rs 6,000)

M2: ₹ 1,00,000 (is still in the business)

Question 10

From the following transactions of a concern, prepare Machinery Account for the year ending 31st March, 2013.

April 1

(i) Purchased a second-hand machinery for ₹ 40,000.

(ii) Spent ₹ 10,000 on repairs to make it serviceable.

Sept.30

Purchased additional new machinery for ₹ 20,000.

Dec. 31

Repairs and renewals of machinery ₹ 2,000.

March 31

Depreciate the machinery at 10% p.a.

Solution:

MachineryAccount

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2013

April 1

Bank A/c (M1) (40,000 + 10,000)

50,000

March 31

Depreciation A/c

September30

Bank A/c (M2)

20,000

M1

5,000

M2 (for 6 months)

1,000

6,000

Balance c/d

M1

45,000

M2

19,000

64,000

70,000

70,000

Note: The repair charges are classified under revenue expenditure as it is collected on 31st December, 2012 but machine was bought on 30th September, 2012.

Question 11

A plant is purchased for ₹ 60,000 on 1st April, 2009. It is estimated that the residual value of this plant at the end of its working life of 10 years will be ₹ 20,920. Depreciation is to be provided at 10% p.a. on diminishing balance method.

You are required to show the Plant Account for 4 years, assuming that the books are closed on 31st March every year.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2010

April 1

Bank A/c

60,000

March 31

Depreciation A/c

6,000

March 31

Balance c/d

54,000

60,000

60,000

2010

2011

April 1

Balance b/d

54,000

March 31

Depreciation A/c

5,400

March 31

Balance c/d

48,600

54,000

54,000

2011

2012

April 1

Balance b/d

48,600

March. 31

Depreciation A/c

4,860

March 31

Balance c/d

43,740

48,600

48,600

2012

2013

April 1

Balance b/d

43,740

March 31

Depreciation A/c

4,374

March 31

Balance c/d

39,366

43,740

43,740

Note: The scrap value of asset is omitted, when depreciation is imposed according to the written down value method.

Question 12

On 1st July, 2005, Geeta Paper Limited purchased a Plant for ₹ 1,50,000 and paid ₹ 10,000 as freight on its carriage. Depreciation was provided at 10% p.a. on the Written Down Value Method on this plant. On 1st Oct., 2008, this plant was sold for ₹ 80,000.

Prepare Plant A/c for 4 years, assuming that the books are closed on 31st March every year.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2005

2006

July 1

Bank A/c (1,50,000 + 10,000)

1,60,000

March 31

Depreciation A/c (for 9 months)

12,000

Balance c/d

1,48,000

1,60,000

1,60,000

2006

2007

April 1

Balance b/d

1,48,000

March 31

Depreciation A/c

14,800

March 31

Balance c/d

1,33,200

1,48,000

1,48,000

2007

2008

April 1

Balance b/d

1,33,200

March 31

Depreciation A/c

13,320

March31

Balance c/d

1,19,880

1,33,200

1,33,200

2008

2008

April 1

Balance b/d

1,19,880

October 1

Depreciation A/c

5,994

Bank A/c (Sale)

80,000

Profit and Loss A/c (Loss on Sale)

33,886

1,19,880

1,19,880

Working Note: Evaluating profit or loss on Sale

Particulars

Value of Plant on 1st April, 2008

1,19,880

Less: 6 months Depreciation

5,994

Value of Plant on 1st October, 2008

1,13,886

Less: Sale Value

80,000

Loss on Sale

33,886

Question 13

A Company purchased a second-hand machine on 1st April, 2016, for ₹ 30,000 and immediately spent ₹ 4,000 on its repair and ₹ 1,000 on its installation. On Oct. 1, 2018, the machine was sold for ₹ 25,000. Prepare Machine Account after charging depreciation @ 10% p.a. by diminishing balance method, assuming that the books are closed on 31st March every year. IGST was charged @ 12% on purchase and sale of machine.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount (₹)

Date

Particulars

Amount (₹)

2016

2017

April 1

Bank A/c (30,000 +4,000 + 1,000)

35,000

March 31

Depreciation A/c

3,500

Balance c/d

31,500

35,000

35,000

2017

2018

April 1

Balance b/d

31,500

March 31

Depreciation A/c

3,150

March 31

Balance c/d

28,350

31,500

31,500

2018

2018

April 1

Balance b/d

28,350

October1

Depreciation A/c

1,418

Bank A/c (Sale)

25,000

Profit and Loss A/c (Loss on Sale)

1,932

28,350

28,350

Working Note: Calculation of Profit or Loss on Sale

Particulars

Value of Machinery on 1st April, 2018

28,350

Less: 6 months depreciation

1,418

Value of Machinery on 1st October, 2018

26,932

Less: Sale Value

25,000

Loss on Sale

1,932

Question 14

A firm purchased on 1st April, 2009, a second-hand Machinery for ₹ 36,000 and spent ₹ 4,000 on its installation. On 1st Oct. in the same year another Machinery costing ₹ 20,000 was purchased. On 1st Oct., 2011, the Machinery bought on 1st April, 2009 was sold off for ₹ 12,000 and on the same date a fresh Machine was purchased for ₹ 64,000. Depreciation is provided annually on 31st March, @ 10% p.a. on the Written Down Value Method. Show the Machine A/c from 1st April, 2009 to 31st March, 2013.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2010

April 1

Bank A/c (M1) (36,000 + 4,000)

40,000

March 31

Depreciation A/c

October 1

Bank A/c (M2)

20,000

M1

4,000

M2 (for 6 months)

1,000

5,000

March 31

Balance c/d

M1

36,000

M2

19,000

55,000

60,000

60,000

2010

2011

April 1

Balance b/d

March 31

Depreciation A/c

M1

36,000

M1

3,600

M2

19,000

55,000

M2

1,900

5,500

March 31

Balance c/d

M1

32,400

M2

17,100

49,500

55,000

55,000

2011

2011

April 1

Balance b/d

October 1

Depreciation A/c (M1)

1,620

M1

32,400

Bank A/c (Sale of M1)

12,000

M2

17,100

49,500

Profit and Loss A/c (Loss on Sale of M1)

18,780

October 1

Bank A/c (M3)

64,000

2012

March 31

Depreciation A/c

M2

1,710

M3 (for 6 months)

3,200

4,910

March 31

Balance c/d

M2

15,390

M3

60,800

76,190

1,13,500

1,13,500

2012

2013

April 1

Balance b/d

March 31

Depreciation A/c

M2

15,390

M2

1,539

M3

60,800

76,190

M3

6,080

7,619

March 31

Balance c/d

M2

13,851

M3

54,720

68,571

76,190

76,190

Working Note: Evaluating profit or loss on Sale

Particulars

Value of Machinery on 1st April, 2011

32,400

Less: 6 months depreciation

1,620

Value of Machinery on 1st October, 2011

30,780

Less: Sale Value

12,000

Loss on Sale

18,780

Question 15 (A)

State four main causes of providing depreciation.

Solution: The four main causes of providing depreciation are.

  • Wear and Tear- Any asset does not remain effective all the time. Its life gradually breaks down and decreases after its usage over a period of time, and needs to be replaced.
  • Obsolescence – With new technologies coming up everyday, the asset might be outdated.
  • Limited agreement or contract – When an asset is obtained for a particular time, so, whether it is utilized or not, its value is considered to be zero when its useful life ends.
  • Deterioration – Due to natural impacts like weather, rain, heat, etc. the asset is deteriorated and its effectiveness decreases

(B) A Company purchased a machinery for ₹ 50,000 on 1st Oct., 2007. Another machinery costing ₹ 10,000 was purchased on 1st Dec., 2008. On 31st March, 2010, the machinery purchased in 2007 was sold at a loss of ₹ 5,000. The Company charges depreciation at the rate of 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year.

Prepare Machinery account for 3 years.

Solution :

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

Date

Particulars

Amount

2007

2008

October 1

Bank A/c (M1)

50,000

March 31

Depreciation A/c (for 6 months)

3,750

March 31

Balance c/d

46,250

50,000

50,000

2008

2009

April1

Balance b/d

46,250

March 31

Depreciation A/c

December 1

Bank A/c (M2)

10,000

M1

6,938

M2 (for 4 months)

500

7,438

March 31

Balance c/d

M1

39,312

M2

9,500

48,812

56,250

56,250

2009

2010

April1

Balance b/d

March 31

Depreciation A/c

5,897

M1

39,312

Bank A/c (Sale of M1)

28,415

M2

9,500

48,812

Profit and Loss A/c (Loss on Sale of M1)

5,000

March 31

Depreciation A/c (M2)

1,425

March 31

Balance c/d

8,075

48,812

48,812

Working Note: Evaluating M1 sale price

Particulars

Value of Machinery on 1st April, 2009

39,312

Less:12 months depreciation

5,897

Value of Machinery on 31st March, 2010

33,415

Less: Sale loss

5,000

Sale Value (Balancing Figure)

28,415

Question 16

Ashoka Ltd. bought a machine on 1st April, 2010 for ₹ 2,40,000 and spent ₹ 4,000 on its carriage and ₹ 6,000 towards installation cost. On 1st July, 2011 it purchased a second hand machinery for ₹ 75,000 and spent ₹ 25,000 on its overhauling.

On 1st January, 2013 it decided to sell the machinery bought on 1st April, 2010 at a loss of ₹ 20,000. It bought another machine on the same date for ₹ 40,000. Company decided to charge depreciation @ 15% p.a. on written down value method. Prepare machinery account for 3 years. Books are closed each year on 31st March.

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

April 1

Bank A/c (M1) (2,40,000

+ 4,000 + 6,000)

2,50,000

March 31

Depreciation A/c

37,500

March 31

Balance c/d

2,12,500

2,50,000

2,50,000

2011

2012

April 01

Balance b/d

2,12,500

March 31

Depreciation A/c

July 01

Bank A/c (M2) (75,000+25,000)

1,00,000

M1

31,875

M2 (for 9 month)

11,250

43,125

March 31

Balance c/d

M1

1,80,625

M2

88,750

2,69,375

3,12,500

3,12,500

2012

2013

April 1

Balance b/d

January 01

Depreciation A/c (M1)

20,320

M1

1,80,625

Bank A/c (Sale of M1)

1,40,305

M2

88,750

2,69,375

Profit and Loss A/c (Loss on Sale of M1)

20,000

2013

March 31

Depreciation A/c

Januar 01

Bank A/c (M3)

40,000

M2

13,312

M3 (for 3 months)

1,500

14,813

March 31

Balance c/d

M2

75,438

M3

38,500

1,13,938

3,09,375

3,09,375

Working Note: Evaluating M1 sale price

Particulars

Value of Machinery on 1st April, 2012

1,80,625

Less: 9 months Depreciation

20,320

Value of Machinery on 1st January, 2013

1,60,305

Less: Loss on Sale

20,000

Sale Value (Balancing Figure)

1,40,305

Question 17

The Sameer Transport Company purchased 10 Trucks at ₹ 90,000 each on 1st April 2011. On 1st October 2013 one of the Trucks was involved in an accident and is completely destroyed. ₹ 56,200 was received from the Insurance company in full settlement. On the same date another truck was purchased by the company for the sum of ₹ 1,00,000. The company writes off 20% per annum on the Diminishing Balance Method. The company maintains the calendar year as its financial year. Show the Truck Account for four years ending 31st December, 2014.

Solution:

Truck Account

Dr.

Cr.

Date

Particulars

Amount

Date

Particulars

Amount

2011

2011

April 1

Bank A/c

December 31

Depreciation A/c

T1

90,000

T1 (for 9 months)

13,500

T2

8,10,000

9,00,000

T2 (for 9 months)

1,21,500

1,35,000

December 31

Balance c/d

T1

76,500

T2

6,88,500

7,65,000

9,00,000

9,00,000

2012

2012

January 1

Balance b/d

December 31

Depreciation A/c

T1

76,500

T1

15,300

T2

6,88,500

7,65,000

T2

1,37,700

1,53,000

December 31

Balance c/d

T1

61,200

T2

5,50,800

6,12,000

7,65,000

7,65,000

2013

2013

January 1

Balance b/d

October 1

Depreciation A/c (T1)

9,180

T1

61,200

October 1

Bank A/c (Sale of T1)

56,200

T2

5,50,800

6,12,000

December 31

Depreciation A/c

October 1

Profit and Loss A/c (Profit on Sale of T1)

4,180

T2

1,10,160

October 1

Bank A/c (T3)

1,00,000

T3 (for 6 months)

5,000

1,15,160

December 31

Balance c/d

T2

4,40,640

T3

95,000

5,35,640

7,16,180

7,16,180

2014

2014

January 1

Balance b/d

December 31

Depreciation A/c

T2

4,40,640

T2

88,128

T3

95,000

5,35,640

T3

19,000

1,07,128

December 31

Balance c/d

T2

3,52,512

T3

76,000

4,28,512

5,35,640

5,35,640

Working Note: Calculation of Profit & Loss on Sale of T1

Particulars

Amount

Value of Truck on Jan. 01, 2013

61,200

Less: Depreciation for 9 months

9,180

Value of Truck on Oct. 01, 2013

52,020

Less: Sale Value

56,200

Profit on Sale

4,180

Note: Here, the truck bought on 1st April, 2011 is divided into two segments i.e. T1 and T2.

Thus, T1: ₹ 90,000 (sold for ₹ 56,200)

T2: ₹ 8,10,000 ( includes cost of 9 trucks)

Question 18

Raja Textiles Co. which closes its books on 31st March, purchased a machine on 1-4-2009 for ₹ 50,000. On 1-10-2010, it purchased an additional machine for ₹ 30,000. The part of the machine which was purchased on 1-4-2009 costing ₹ 10,000 was sold for ₹ 3,600 on 30th Sept., 2012. Prepare the Machine Account for four years, if the depreciation is provided at the rate of 10% p.a. on Diminishing Balance Method.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2010

April 1

Bank A/c

March 31

Depreciation A/c

M1

10,000

M1

1,000

M2

40,000

50,000

M2

4,000

5,000

March 31

Balance c/d

M1

9,000

M2

36,000

45,000

50,000

50,000

2010

2011

April 1

Balance b/d

March 31

Depreciation A/c

M1

9,000

M1

900

M2

36,000

45,000

M2

3,600

October1

Bank A/c (M3)

30,000

M3 (for 6 months)

1,500

6,000

March 31

Balance c/d

M1

8,100

M2

32,400

M3

28,500

69,000

75,000

75,000

2011

2012

April 1

Balance b/d

March 31

Depreciation A/c

M1

8,100

M1

810

M2

32,400

M2

3,240

M3

28,500

69,000

M3

2,850

6,900

March 31

Balance c/d

M1

7,290

M2

29,160

M3

25,650

62,100

69,000

69,000

2012

2012

April 1

Balance b/d

September 30

Depreciation A/c (M1)

365

M1

7,290

September 30

Bank A/c (sale of M1)

3,600

M2

29,160

September 30

Profit and Loss A/c (Loss on Sale of M1)

3,325

M3

25,650

62,100

2013

March 31

Depreciation A/c

M2

2,916

M3

2,565

5,481

March 31

Balance c/d

M2

26,244

M3

23,085

49,329

62,100

62,100

Working Note: Evaluation of m1 Profit & Loss Sale

Particulars

Value of Machinery on 1st April, 2012

7,290

Less: 6 months Depreciation

365

Value of Machinery on 30th September, 2012

6,925

Less: Sale Value

3,600

Loss on Sale

3,325

Note: Machine bought on 1st April, 2009 is divided into two parts M1 and M2.

Thus, M1: ₹ 10,000 (sold for ₹ 3,600)

M2: ₹ 40,000

Question 19

A Company, which closes its books on 31st March every year, purchased on 1st July, 2010, machinery costing ₹ 30,000. It purchased further machinery on 1st January, 2011, costing ₹ 20,000 and on 1st October, 2011, costing ₹ 10,000. On 1st April, 2012, one-third of the machinery installed on 1st July, 2010, became obsolete and was sold for ₹ 3,000.

Show how the machinery account would appear in the books of the Company, it being given that machinery was depreciated by Diminishing Balance Method at 10% per annum. What would be the balance of Machinery Account on 1st April, 2013?

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

July 01

Bank A/c

March 31

Depreciation A/c

M1

10,000

M1 (for 9 months)

750

M2

20,000

30,000

M2 (for 9 months)

1,500

2011

M3 (for 3 months)

500

2,750

January1

Bank A/c (M3)

20,000

March 31

Balance c/d

M1

9,250

M2

18,500

M3

19,500

47,250

50,000

50,000

2011

2012

April 1

Balance b/d

March 31

Depreciation A/c

M1

9,250

M1

925

M2

18,500

M2

1,850

M3

19,500

47,250

M3

1,950

October 1

Bank A/c (M4)

10,000

M4 (for 6 months)

500

5,225

March 31

Balance c/d

M1

8,325

M2

16,650

M3

17,550

M4

9,500

52,025

57,250

57,250

2012

2012

April 1

Balance b/d

April 1

Bank A/c (Sale of M1)

3,000

M1

8,325

Profit and Loss A/c (Loss on Sale of M1)

5,325

M2

16,650

2013

M3

17,550

March 31

Depreciation A/c

M4

9,500

52,025

M2

1,665

M3

1,755

M4

950

4,370

March 31

Balance c/d

M2

14,985

M3

15,795

M4

8,550

39,330

52,025

52,025

Working Note: Evaluation of M1 profit & loss on Sale

Particulars

Value of Machinery on 1st April, 2012

8,325

Less: Sale Value

3,000

Loss on Sale of Machinery

5,325

Note: Machinery bought on 1st July, 2010 is divided into two parts i.e. M1 and M2.

M1: 1/3rd value i.e ₹ 10,000 (sold for ₹ 3,000)

M2: 2/3rd value i.e. ₹ 40,000 (is in the business)

Question 20

On July 1, 2005 Pushpak Ltd. purchased a machinery for ₹ 5,70,000 and paid ₹ 30,000 for its overhauling and installation. Depreciation is provided @ 20% p.a. on Original Cost Method and the books are closed on 31st March every year. The machine was sold on 31st January 2008 for a sum of ₹ 1,60,000. You are required to show the Machinery Account and Provision for Depreciation Account for three years.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

Date

Particulars

Amount ₹

2005

2006

July 1

Bank A/c (5,70,000 + 30,000)

6,00,000

March 31

Balance c/d

6,00,000

6,00,000

6,00,000

2006

2007

April 1

Balance b/d

6,00,000

March 31

Balance c/d

6,00,000

6,00,000

6,00,000

2007

2008

April 1

Balance b/d

6,00,000

January 31

Provision for Depreciation A/c

3,10,000

Bank A/c (Sale)

1,60,000

Profit and Loss A/c (Loss on Sale)

1,30,000

6,00,000

6,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount

2006

2006

March 31

Balance c/d

90,000

March 31

Depreciation A/c (for 9 months)

90,000

90,000

90,000

2007

2006

March 31

Balance c/d

2,10,000

April 1

Balance b/d

90,000

2007

March 31

Depreciation A/c

1,20,000

2,10,000

2,10,000

2008

2007

January 31

Machinery A/c

3,10,000

April 1

Balance b/d

2,10,000

2008

January 31

Depreciation A/c (for 10 months)

1,00,000

3,10,000

3,10,000

Working Note: Evaluation Profit & Loss on Sale

Particulars

Amount

Value of Machinery on 1st July, 2005

6,00,000

Less: 9 Months depreciation

90,000

Value of Machinery on 1st April, 2006

5,10,000

Less: Depreciation

1,20,000

Value of Machinery on 1st April, 2007

3,90,000

Less: 10 Months depreciation

1,00,000

Value of Machinery on 31st January, 2008

2,90,000

Less: Sale Value

1,60,000

Loss on Sale

1,30,000

Question 21

A machine as purchased on 1st October 2012 at a cost of ₹ 3,00,000 and ₹ 20,000 were spent on its installation. The depreciation is written off at 10% p.a. on the Diminishing Value Method. The books are closed on 31st March every year. The machine was sold for ₹ 1,30,000 on 1st July 2015. Show the Machinery Account and Provision for Depreciation Account for all the years.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2013

October1

Bank A/c (3,00,000 + 20,000)

3,20,000

March 31

Balance c/d

3,20,000

3,20,000

3,20,000

2013

2014

April 1

Balance b/d

3,20,000

March 31

Balance c/d

3,20,000

3,20,000

3,20,000

2014

2015

April 1

Balance b/d

3,20,000

March 31

Balance c/d

3,20,000

3,20,000

3,20,000

2015

2015

April 1

Balance b/d

3,20,000

July 1

Provision for Depreciation A/c

79,916

Bank A/c (Sale )

1,30,000

Profit and Loss A/c (Loss on Sale)

1,10,084

3,20,000

3,20,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2013

2013

March 31

Balance c/d

16,000

March 31

Depreciation A/c (for 6 months)

16,000

16,000

16,000

2014

2013

March 31

Balance c/d

46,400

April 1

Balance b/d

16,000

2014

March 31

Depreciation A/c

30,400

46,400

46,400

2015

2014

Mar. 31

Balance c/d

73,760

April 1

Balance b/d

46,400

2015

March 31

Depreciation A/c

27,360

73,760

73,760

2015

2015

July 1

Machinery A/c

79,916

April 1

Balance b/d

73,760

July 1

Depreciation A/c (for 3 months)

6,156

79,916

79,916

Working Note: Evaluate sale of Profit & Loss

Particulars

Value of Machinery on 1st October, 2012

3,20,000

Less: 6 Months depreciation

16,000

Value of Machinery on 1st April, 2013

3,04,000

Less: Depreciation

30,400

Value of Machinery on 1st April, 2014

2,73,600

Less: Depreciation

27,360

Value of Machinery on 1st April, 2015

2,46,240

Less: 3 Months depreciation

6,156

Value of Machinery on 1st July, 2015

2,40,084

Less: Sale Value

1,30,000

Loss on Sale

1,10,084

Question 22

On 1st April 2008, the Company purchased 6 machines for ₹ 50,000 each. Depreciation at the rate of 10% p.a. is charged on Straight Line Method. The accounting year of the Company ends on 31st March and the depreciation is credited to a separate ‘Provision for Depreciation Account’. On 1st October, 2010, one machine was sold for ₹ 30,000 and on 1st April, 2011 a second machine was sold for ₹ 24,000.

You are required to prepare Machinery Account and Provision for Depreciation Account for four years ending 31st March, 2012.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2008

2009

April 1

Bank A/c

March 31

Balance c/d

M1

50,000

M1

50,000

M2

50,000

M2

50,000

M3

2,00,000

3,00,000

M3

2,00,000

3,00,000

3,00,000

3,00,000

2009

2010

April 1

Balance b/d

March 31

Balance c/d

M1

50,000

M1

50,000

M2

50,000

M2

50,000

M3

2,00,000

3,00,000

M3

2,00,000

3,00,000

3,00,000

3,00,000

2010

2010

April 1

Balance b/d

October 1

Provision for Depreciation A/c

12,500

M1

50,000

Bank A/c (Sale of M1)

30,000

M2

50,000

Profit and Loss A/c (Loss on Sale of M1)

7,500

M3

2,00,000

3,00,000

2011

March 31

Balance c/d

M2

50,000

M3

2,00,000

2,50,000

3,00,000

3,00,000

2011

2011

April 1

Balance b/d

April 1

Provision for Depreciation A/c

15,000

M2

50,000

Bank A/c (Sale of M2)

24,000

M3

2,00,000

2,50,000

Profit and Loss A/c (Loss on Sale of M2)

11,000

2012

March 31

Balance c/d (M3)

2,00,000

2,50,000

2,50,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2009

March 31

Balance c/d

30,000

March 31

Depreciation A/c

M1

5,000

M2

5,000

M3

20,000

30,000

30,000

30,000

2010

2009

March 31

Balance c/d

60,000

April 1

Balance b/d

30,000

2010

March 31

Depreciation A/c

M1

5,000

M2

5,000

M3

20,000

30,000

60,000

60,000

2010

2010

October 1

Machinery A/c (M1)

(5,000 + 5,000 + 2,500)

12,500

April 1

Balance b/d

60,000

2011

October1

Depreciation A/c (M1)

2,500

March 31

Balance c/d

75,000

2011

March 31

Depreciation A/c

M2

5,000

M3

20,000

25,000

87,500

87,500

2011

2011

April 1

Machinery A/c (M2)

(5,000 + 5,000 + 5,000)

15,000

April 1

Balance b/d

75,000

2012

2012

March 31

Balance c/d

80,000

March 31

Depreciation A/c (M3)

20,000

95,000

95,000

Working Notes 1: Evaluate M1 Profit & Loss on Sale

Particulars

Value of Machinery on 1st April, 2008

50,000

Less: Depreciation

5,000

Value of Machinery on 1st April, 2009

45,000

Less: Depreciation

5,000

Value of Machinery on 1st April, 2010

40,000

Less: 6 months depreciation

2,500

Value of Machinery on 1st October, 2010

37,500

Less: Sale Value

30,000

Loss on Sale

7,500

Working Note 2: Evaluate M2 Profit & Loss on sale

Particulars

Value of Machinery on 1st April, 2008

50,000

Less: Depreciation

5,000

Value of Machinery on 1st April, 2009

45,000

Less: Depreciation

5,000

Value of Machinery on 1st April, 2010

40,000

Less: Depreciation

5,000

Value of Machinery on 1st April, 2011

35,000

Less: Sale Value

24,000

Loss on Sale

11,000

Note: Machinery bought on 1st April, 2008 is divided into M1, M2 and M3.

M1: ₹ 50,000 (sold for ₹ 30,000 on 1st October, 2010)

M2: ₹ 50,000 (sold for ₹ 24,000 on 1st April, 2011)

M3:₹ 2,00,000 (is the 4machines cost)

Question 23

On 1st July 2016, ABC Ltd. purchase 4 machines for ₹ 80,000 each. The accounting year of the company ends on 31st March every year. Depreciation is provided at the rate of 15% p.a. on original cost.

On 1st April, 2008 one machine was sold for ₹ 50,000 and on 1st January, 2010 a second machine was sold for ₹ 40,000. Another machine with a higher capacity which cost ₹ 2,00,000 was purchased on 1st January, 2010.

You are required to show: (i) Machinery Account, (ii) Depreciation Account, and (iii) Provision for Depreciation Account for four years ending 31st March, 2010.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2006

2007

July 1

Bank A/c

March 31

Balance c/d

M1

80,000

M1

80,000

M2

80,000

M2

80,000

M3

1,60,000

3,20,000

M3

1,60,000

3,20,000

3,20,000

3,20,000

2007

2008

April 1

Balance b/d

March 31

Balance c/d

M1

80,000

M1

80,000

M2

80,000

M2

80,000

M3

1,60,000

3,20,000

M3

1,60,000

3,20,000

3,20,000

3,20,000

2008

2008

April 1

Balance b/d

April 1

Provision for Depreciation A/c

21,000

M1

80,000

April 1

Bank A/c (Sale of M1 )

50,000

M2

80,000

April 1

Profit and Loss A/c (Loss on Sale of M1)

9,000

M3

1,60,000

3,20,000

2009

March 31

Balance c/d

M2

80,000

M3

1,60,000

2,40,000

3,20,000

3,20,000

2009

2010

April 1

Balance b/d

January 1

Provision for Depreciation A/c

42,000

M2

80,000

January 1

Bank A/c (Sale of M2)

40,000

M3

1,60,000

2,40,000

March 31

Balance c/d

2010

M3

1,60,000

January1

Profit and Loss A/c (Profit on Sale of M2)

2,000

M4

2,00,000

3,60,000

January1

Bank A/c (M4)

2,00,000

4,42,000

4,42,000

Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2007

2007

March 31

Provision for Depreciation A/c

36,000

March 31

Profit & Loss A/c

36,000

36,000

36,000

2008

2008

March31

Provision for Depreciation A/c

48,000

March 31

Profit & Loss A/c

48,000

48,000

48,000

2009

2009

March31

Provision for Depreciation A/c

36,000

March 31

Profit & Loss A/c

36,000

36,000

36,000

2010

2010

March31

Provision for Depreciation A/c

40,500

March 31

Profit & Loss A/c (31,500 + 9,000)

40,500

40,500

40,500

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2007

2007

March 31

Balance c/d

36,000

March 31

Depreciation A/c

M1(for 9 months)

9,000

M2 (for 9 months)

9,000

M3 (for 9 months)

18,000

36,000

36,000

36,000

2008

2007

March 31

Balance c/d

84,000

April 1

Balance b/d

36,000

2008

March 31

Depreciation A/c

M1

12,000

M2

12,000

M3

24,000

48,000

84,000

84,000

2008

2008

April 1

Machinery A/c (9,000 + 12,000)

21,000

April 1

Balance b/d

84,000

2009

2009

March 31

Balance c/d

99,000

March 31

Depreciation A/c

M2

12,000

M3

24,000

36,000

1,20,000

1,20,000

2010

2009

January 1

Machinery A/c (9,000 +12,000 + 12,000 + 9,000)

42,000

April 1

Balance b/d

99,000

March 31

Balance c/d

97,500

2010

January 1

Depreciation A/c (M2)

9,000

March 31

Depreciation A/c

M3

24,000

M4 (for 3 months)

7,500

31,500

1,39,500

1,39,500

Working Notes 1:Evaluate M1 profit & loss on Sale

Particulars

Value of Machinery on 1st July, 2006

80,000

Less: 9 months depreciation

9,000

Value of Machinery on 1st April, 2007

71,000

Less: Depreciation

12,000

Value of Machinery on 1st April, 2008

59,000

Less: Sale Value

50,000

Loss on Sale

9,000

Working Note 2: Calculation of Profit & Loss on Sale of M2

Particulars

Value of Machinery on 1st July, 2006

80,000

Less: 9 months depreciation

9,000

Value of Machinery on 1st April, 2007

71,000

Less: Depreciation

12,000

Value of Machinery on 1st April, 2008

59,000

Less: Depreciation

12,000

Value of Machinery on 1st April, 2009

47,000

Less: 9 months depreciation

9,000

Value of Machinery on 1st January, 2010

38,000

Less: Sale Value

40,000

Profit on Sale

2,000

Note: Machinery bought on 1st July, 2006 is divided into M1, M2 and M3.

M1: ₹ 80,000 (sold for ₹ 50,000 on 1st April, 2008)

M2: ₹ 80,000 (sold for Rs 40,000 on 1st January, 2010)

M3: ₹ 1,60,000 (comprises the cost of two machines)

Question 24

X Ltd. which closes its books of account every year on 31st March, purchased on 1st October, 2011 machinery costing ₹ 4,40,000. It purchased further machinery on 1st April, 2012 costing ₹ 5,20,000. On 30th June, 2013, the first machine was sold for ₹ 2,50,000 and on the same date a fresh machine was installed at a cost of ₹ 3,00,000. On 1st July 2014, the second machine purchased on 1st April 2012 was also sold for ₹ 3,25,000.

The company writes off depreciation at 10% p.a. on the Straight Line Method each year. Show the Machinery A/c, Depreciation A/c and Provision for Depreciation A/c for all the four years.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount

Date

Particulars

Amount

2011

2012

October1

Bank A/c (M1)

4,40,000

March 31

Balance c/d

4,40,000

4,40,000

4,40,000

2012

2013

April 1

Balance b/d

4,40,000

March 31

Balance c/d

April 1

Bank A/c (M2)

5,20,000

M1

4,40,000

M2

5,20,000

9,60,000

9,60,000

9,60,000

2013

2013

April 1

Balance b/d

June 30

Provision for Depreciation A/c

77,000

M1

4,40,000

Bank A/c (Sale of M1 )

2,50,000

M2

5,20,000

9,60,000

Profit and Loss A/c (Loss on Sale of M1)

1,13,000

June 30

Bank A/c (M3)

3,00,000

2014

March 31

Balance c/d

M2

5,20,000

M3

3,00,000

8,20,000

12,60,000

12,60,000

2014

2014

April 1

Balance b/d

July 01

Provision for Depreciation A/c

1,17,000

M2

5,20,000

Bank A/c (Sale of M2)

3,25,000

M3

3,00,000

8,20,000

Profit and Loss A/c (Loss on Sale of M2)

78,000

2015

March 31

Balance c/d (M3)

3,00,000

8,20,000

8,20,000

Depreciation Account

Dr.

Cr.

Date

Particulars

Amount

Date

Particulars

Amount

2012

2012

March 31

Provision for Depreciation A/c

22,000

March 31

Profit & Loss A/c

22,000

22,000

22,000

2013

2013

March 31

Provision for Depreciation A/c

96,000

March 31

Profit & Loss A/c

96,000

96,000

96,000

2014

2014

March 31

Provision for Depreciation A/c

85,500

March 31

Profit & Loss A/c

(74,500 + 11,000)

85,500

85,500

85,500

2015

2015

March 31

Provision for Depreciation A/c

43,000

March 31

Profit & Loss A/c

(30,000 + 13,000)

43,000

43,000

43,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount (Rs)

Date

Particulars

Amount (Rs)

2012

2012

March 31

Balance c/d (M1)

22,000

March 31

Depreciation A/c (M1)

(for 6 months)

22,000

22,000

22,000

2013

2012

March 31

Balance c/d

1,18,000

April 1

Balance b/d

22,000

2013

March 31

Depreciation A/c

M1

44,000

M2

52,000

96,000

1,18,000

1,18,000

2013

2013

June 30

Machinery A/c (M1)

(22,000 + 44,000 + 11,000)

77,000

April 1

Balance b/d

1,18,000

2014

June 30

Depreciation A/c (M1)

(for 3 months)

11,000

March 31

Balance c/d

1,26,500

2014

March 31

Depreciation A/c

M2

52,000

M3 (for 9 months)

22,500

74,500

2,03,500

2,03,500

2014

2014

July 01

Machinery A/c (M2)

(52,000 + 52,000 + 13,000)

1,17,000

April 1

Balance b/d

1,26,500

2015

July 01

Depreciation A/c (M2) (for 3 months)

13,000

March 31

Balance c/d (M3)

52,500

2015

March. 31

Depreciation A/c (M3)

30,000

1,69,500

1,69,500

Working Notes 1: Evaluate M1 profit & loss on Sale

Particulars

Value of Machinery on 1st October, 2011

4,40,000

Less: 6 months depreciation

22,000

Value of Machinery on 1st April, 2012

4,18,000

Less: Depreciation

44,000

Value of Machinery on 1st April, 2013

3,74,000

Less: 3 months depreciation

11,000

Value of Machinery on 30th June, 2013

3,63,000

Less: Sale Value

2,50,000

Loss on Sale

1,13,000

Working Notes 2: Evaluate M2 profit & loss on Sale

Particulars

Value of Machinery on 1st April, 2012

5,20,000

Less: Depreciation

52,000

Value of Machinery on 1st April, 2013

4,68,000

Less: Depreciation

52,000

Value of Machinery on 1st April, 2014

4,16,000

Less: 3 months depreciation

13,000

Value of Machinery on 30th June, 2014

4,03,000

Less: Sale Value

3,25,000

Loss on Sale

78,000

Question 25

A company purchased second-hand machinery on 1st May, 2009 for ₹ 5,85,000 and immediately spent ₹ 15,000 on its erection. On 1st October, 2010, it purchased another machine for ₹ 4,00,000. On 31st July, 2011, it sold off the first machine for ₹ 2,50,000 and bought another for ₹ 4,20,000. On 1st November, 2012, the second machine was also sold off for ₹ 3,00,000. Depreciation was provided on the machinery @ 15% p.a. on Equal Instalment Method.

Show the Machinery Account, Depreciation Account and Provision for Depreciation Account assuming that the books are closed on 31st March every year.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2010

May 1

Bank A/c (M1) (5,58,000 + 15,000)

6,00,000

March 31

Balance c/d

6,00,000

6,00,000

6,00,000

2010

2011

April 1

Balance b/d

6,00,000

March 31

Balance c/d

October1

Bank A/c (M2)

4,00,000

M1

6,00,000

M2

4,00,000

10,00,000

10,00,000

10,00,000

2011

2011

April1

Balance b/d

July 31

Provision for Depreciation A/c

2,02,500

M1

6,00,000

Bank A/c (Sale of M1)

2,50,000

M2

4,00,000

10,00,000

Profit and Loss A/c (Loss on Sale of M1)

1,47,500

July 31

Bank A/c (M3)

4,20,000

2012

March 31

Balance c/d

M2

4,00,000

M3

4,20,000

8,20,000

14,20,000

14,20,000

2012

2012

April 1

Balance b/d

November 1

Provision for Depreciation A/c

1,25,000

M2

4,00,000

Bank A/c (Sale of M2)

3,00,000

M3

4,20,000

8,20,000

2013

November1

Profit and Loss A/c (Profit on Sale of M2)

25,000

March 31

Balance c/d (M3)

4,20,000

8,45,000

8,45,000

Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2010

March 31

Provision for Depreciation A/c

82,500

March 31

Profit & Loss A/c

82,500

82,500

82,500

2011

2011

March31

Provision for Depreciation A/c

1,20,000

March 31

Profit & Loss A/c

1,20,000

1,20,000

1,20,000

2012

2012

March 31

Provision for Depreciation A/c

1,32,000

March 31

Profit & Loss A/c (1,02,000

+ 30,000)

1,32,000

1,32,000

1,32,000

2013

2013

March31

Provision for Depreciation A/c

98,000

March 31

Profit & Loss A/c (63,000

+ 35,000)

98,000

98,000

98,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2010

March31

Balance c/d

82,500

March 31

Depreciation A/c (M1) (for 11 months)

82,500

82,500

82,500

2011

2010

March31

Balance c/d

2,02,500

April1

Balance b/d

82,500

2011

March 31

Depreciation A/c

M1

90,000

M2 (for 6 months)

30,000

1,20,000

2,02,500

2,02,500

2011

2011

July 31

Machinery A/c (82,500 + 90,000

+ 30,000)

2,02,500

April 1

Balance b/d

2,02,500

2012

July 31

Depreciation A/c (M1) (for

4 months)

30,000

March 31

Balance c/d

1,32,000

2012

March 31

Depreciation A/c

M2

60,000

M3 (for 8 months)

42,000

1,02,000

3,34,500

3,34,500

2011

2012

November 1

Machinery A/c (30,000

+ 60,000 + 35,000)

1,25,000

April 1

Balance b/d

1,32,000

2013

November1

Depreciation A/c (M2) (for 7 months)

35,000

March 31

Balance c/d

1,05,000

2013

March 31

Depreciation A/c (M3)

63,000

2,30,000

2,30,000

Working Notes 1: Evaluate M1 profit & loss on Sale

Particulars

Value of Machinery on 1st May, 2009

6,00,000

Less: 11 months depreciation

82,500

Value of Machinery on 1st April, 2010

5,17,500

Less: Depreciation

90,000

Value of Machinery on 1st April, 2011

4,27,500

Less: 4 months depreciation

30,000

Value of Machinery on 31st July, 2011

3,97,500

Less: Sale Value

2,50,000

Loss on Sale

1,47,500

Working Notes 1: Evaluate M2 profit & loss on Sale

Particulars

Value of Machinery on 1st October, 2010

4,00,000

Less: 6 months depreciation

30,000

Value of Machinery on 1st April, 2011

3,70,000

Less: Depreciation

60,000

Value of Machinery on 1st April, 2012

3,10,000

Less: 7 months depreciation

35,000

Value of Machinery on 1st November, 2012

2,75,000

Less: Sale Value

3,00,000

Profit on Sale

25,000

Question 26

X Ltd. purchased a plant on 1st July, 2010 costing ₹ 5,00,000. It purchased another plant on 1st September, 2010 costing ₹ 3,00,000. On 31st December, 2012, the plant purchased on 1st July, 2010 got out of order and was sold for ₹ 2,15,000. Another plant was purchased to replace the same for ₹ 6,00,000. Depreciation is to be provided at 20% p.a. according to Written Down Value Method. The accounts are closed every year on 31st March.

Show the Plant Account and Provision for Depreciation Account.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

July 1

Bank A/c (P1)

5,00,000

March 31

Balance c/d

September 1

Bank A/c (P2)

3,00,000

P1

5,00,000

P2

3,00,000

8,00,000

8,00,000

8,00,000

2011

2012

April1

Balance b/d

March 31

Balance c/d

P1

5,00,000

P1

5,00,000

P2

3,00,000

8,00,000

P2

3,00,000

8,00,000

8,00,000

8,00,000

2012

2012

April 1

Balance b/d

December 31

Provision for Depreciation A/c

2,11,000

P1

5,00,000

Bank A/c (Sale of P1)

2,15,000

P2

3,00,000

8,00,000

Profit and Loss A/c (Loss on Sale of P1)

74,000

December 31

Bank A/c (P3)

6,00,000

2013

March 31

Balance c/d

P2

3,00,000

P3

6,00,000

9,00,000

14,00,000

14,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

March 31

Balance c/d

1,10,000

March 31

Depreciation A/c

P1 (for 9 months)

75,000

P2 (for 7 months)

35,000

1,10,000

1,10,000

1,10,000

2012

2011

March 31

Balance c/d

2,48,000

April 1

Balance b/d

1,10,000

2012

March 31

Depreciation A/c

P1

85,000

P2

53,000

1,38,000

2,48,000

2,48,000

2012

2012

December 31

Machinery A/c (75,000 + 85,000 + 66,000)

2,11,000

April 1

Balance b/d

2,48,000

2013

December 31

Depreciation A/c (P1) (for 9 months)

51,000

March 31

Balance c/d

1,60,400

2013

March 31

Depreciation A/c

P2

42,400

P3(for 3 months)

30,000

72,400

3,71,400

3,71,400

Working Note: Evaluate P1 Profit & Loss on sale

Particulars

Value of Plant on 1st July, 2010

5,00,000

Less: 9 months depreciation

75,000

Value of Plant on 1st April, 2011

4,25,000

Less: Depreciation

85,000

Value of Plant on 1st April, 2012

3,40,000

Less: 9 months depreciation

51,000

Value of Plant on 31st December, 2012

2,89,000

Less: Sale Value

2,15,000

Loss on Sale

74,000

Question 27

On 1st August, 2010, Hindustan Toys Ltd. purchased a plant for ₹ 12,00,000. The firm writes off depreciation at 10% p.a. on the diminishing balance and the books are closed on 31st March each year. On 1st July, 2012, a part of this plant of which the original cost was ₹ 1,80,000 was sold for ₹ 1,00,000 and on the same date a new plant was purchased for ₹ 4,00,000. Show the Plant Account and Provision for Depreciation Account for three years ending 31st March, 2013.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

August 1

Bank A/c

March 31

Balance c/d

P1

1,80,000

P1

1,80,000

P2

10,20,000

12,00,000

P2

10,20,000

12,00,000

12,00,000

12,00,000

2011

2012

April 1

Balance b/d

March 31

Balance c/d

P1

1,80,000

P1

1,80,000

P2

10,20,000

12,00,000

P2

10,20,000

12,00,000

12,00,000

12,00,000

2012

2012

April 1

Balance b/d

July 01

Provision for Depreciation A/c

32,580

P1

1,80,000

Bank A/c (Sale of P1)

1,00,000

P2

10,20,000

12,00,000

Profit and Loss A/c (Loss on Sale of P1)

47,420

July 1

Bank A/c (P3)

4,00,000

2013

March 31

Balance c/d

P2

10,20,000

P3

4,00,000

14,20,000

16,00,000

16,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

March 31

Balance c/d

80,000

March 31

Depreciation A/c

P1 (for 8 months)

12,000

P2 (for 8 months)

68,000

80,000

80,000

80,000

2012

2011

March 31

Balance c/d

1,92,000

April 1

Balance b/d

80,000

2012

March 31

Depreciation A/c

P1

16,800

P2

95,200

1,12,000

1,92,000

1,92,000

2012

2012

July 01

Plant A/c (P1) (12,000 +

16,800 + 3,780)

32,580

April 1

Balance b/d

1,92,000

2013

July 01

Depreciation A/c (P1)

(for 3 months)

3,780

March 31

Balance c/d

2,78,880

2013

March 31

Depreciation A/c

P2

85,680

P3 (for 9 months)

30,000

1,15,680

3,11,460

3,11,460

Working Note: Evaluate P1 profit & loss on Sale

Particulars

Value of Plant on 1st August, 2010

1,80,000

Less: 8 months depreciation

12,000

Value of Plant on 1st April, 2011

1,68.000

Less: Depreciation

16,800

Value of Plant on 1st April, 2012

1,51,200

Less: 3 months depreciation

3,780

Value of Plant on 1st July, 2012

1,47,420

Less: Sale Value

1,00,000

Loss on Sale

47,420

Note: Plant bought on 1st August, 2010 is categorised into P1 and P2.

P1: ₹ 1,80,000 (sold for ₹1,00,000 on 1st July, 2012)

P2: ₹ 10,20,000

Question 28

On 1st April 2012, Banglore Silk Ltd. purchased a machinery for ₹ 20,00,000. It provides depreciation at 10% p.a. on the Written Down Value Method and closes its books on 31st March every year. On 1st July 2014, a part of the machinery purchased on 1st April 2012 for ₹ 4,00,000 was sold for ₹ 3,20,000. On 1st November 2014, a new machinery was purchased for ₹ 4,80,000. You are required to prepare Machinery Account, Depreciation Account and Provision for Depreciation Account for three years ending 31st March 2015.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2013

April 1

Bank A/c

March 31

Balance c/d

M1

4,00,000

M1

4,00,000

M2

16,00,000

20,00,000

M2

16,00,000

20,00,000

20,00,000

20,00,000

2013

2014

April 1

Balance b/d

March 31

Balance c/d

20,00,000

M1

4,00,000

M1

4,00,000

M2

16,00,000

20,00,000

M2

16,00,000

20,00,000

20,00,000

20,00,000

2014

2014

April 1

Balance b/d

July 1

Provision for Depreciation A/c

84,100

M1

4,00,000

July 1

Bank A/c (Sale of M1)

3,20,000

M2

16,00,000

20,00,000

2015

July 1

Profit and Loss A/c

(Profit on Sale of M1)

4,100

March 31

Balance c/d

November 1

Bank A/c (M3)

4,80,000

M2

16,00,000

M3

4,80,000

20,80,000

24,84,100

24,84,100

Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2013

2013

March 31

Provision for Depreciation A/c

2,00,000

March 31

Profit and Loss A/c

2,00,000

2,00,000

2,00,000

2014

2014

March 31

Provision for Depreciation A/c

1,80,000

March 31

Profit and Loss A/c

1,80,000

1,80,000

1,80,000

2015

2015

March 31

Provision for Depreciation A/c

1,57,700

March 31

Profit and Loss A/c (1,47,600 + 8,100)

1,57,700

1,57,700

1,57,700

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount (Rs)

Date

Particulars

Amount (Rs)

2013

2013

March 31

Balance c/d

2,00,000

March 31

Depreciation A/c

M1

40,000

M2

1,60,000

2,00,000

2,00,000

2,00,000

2014

2013

March 31

Balance c/d

3,80,000

April 1

Balance b/d

2,00,000

2014

March 31

Depreciation A/c

M1

36,000

M2

1,44,000

1,80,000

3,80,000

3,80,000

2014

2014

July 1

Machinery A/c (M1) (40,000 + 36,000

+ 8,100)

84,100

April 1

Balance b/d

3,80,000

2015

July 01

Depreciation A/c (M1) (for 3 months)

8,100

March 31

Balance c/d

4,53,600

2015

March 31

Depreciation A/c

M2

1,29,600

M3 (for 5 months)

20,000

1,49,600

5,37,700

5,37,700

Working Note: Evaluate M1 profit & loss on Sale

Particulars

Value of Machinery on 1st April, 2012

4,00,000

Less: Depreciation

40,000

Value of Machinery on 1st April, 2013

3,60,000

Less: Depreciation

36,000

Value of Machinery on 1st April, 2013

3,24,000

Less: Depreciation for 3 months

8,100

Value of Machinery on 1 July, 2014

3,15,900

Less: Sale Value

3,20,000

Profit on Sale

4,100

Note: Machinery bought on 1st April, 2012 is divided into M1 and M2.

M1: ₹ 4,00,000 (sold for ₹ 3,20,000 on 1st July, 2014)

M2: ₹ 16,00,000

Question 29

Binny Textiles Ltd. which depreciates its machinery at 20% p.a. on diminishing balance method, purchased a machine for ₹ 6,00,000 on 1st October, 2010. It closes its books on 31st March every year. On 1st January, 2012, it purchased another machine for ₹ 1,50,000. On 1st December, 2012, one-third of the machinery purchased on 1st October, 2010 was sold for ₹ 80,000.

You are required to prepare Machinery A/c and Provision for Depreciation A/c for the relevant years

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

October 1

Bank A/c

March 31

Balance c/d

M1

2,00,000

M1

2,00,000

M2

4,00,000

6,00,000

M2

4,00,000

6,00,000

6,00,000

6,00,000

2011

2012

April 1

Balance b/d

March 31

Balance c/d

M1

2,00,000

M1

2,00,000

M2

4,00,000

6,00,000

M2

4,00,000

2012

M3

1,50,000

7,50,000

December 1

Bank A/c (M3)

1,50,000

7,50,000

7,50,000

2012

2012

April 1

Balance b/d

December 1

Provision for Depreciation A/c

75,200

M1

2,00,000

Bank A/c (Sale of M1)

80,000

M2

4,00,000

Profit and Loss A/c (Loss on Sale of M1)

44,800

M3

1,50,000

7,50,000

2013

March 31

Balance c/d

M2

4,00,000

M3

1,50,000

5,50,000

7,50,000

7,50,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

March 31

Balance c/d

60,000

March 31

Depreciation A/c

M1 (for 6 months)

20,000

M2 (for 6 months)

40,000

60,000

60,000

60,000

2012

2011

March 31

Balance c/d

1,75,500

April 1

Balance b/d

60,000

2012

March 31

Depreciation A/c

M1

36,000

M2

72,000

M3 (for 3 months)

7,500

1,15,500

1,75,500

1,75,500

2012

2012

December 1

Machinery A/c (M1) (20,000 +

36,000 + 19,200)

75,200

April 1

Balance b/d

1,75,500

2013

December1

Depreciation A/c (M1) (for 8

months)

19,200

March 31

Balance c/d

2,05,600

2013

March 31

Depreciation A/c

M2

57,600

M3

28,500

86,100

2,80,800

2,80,800

Working Note: Evaluate M1 profit & loss on sale

Particulars

Value of Machinery on 1st October, 2010

2,00,000

Less: 6 months depreciation

20,000

Value of Machinery on 1st April, 2011

1,80,000

Less: Depreciation

36,000

Value of Machinery on 1st April, 2012

1,44,000

Less: 8 months depreciation

19,200

Value of Machinery on 1st december, 2012

1,24,800

Less: Sale Value

80,000

Loss on Sale

44,800

Note: Machine bought on 1st April, 2012 is divided into M1 and M2.

M1: ₹ 2,00,000 (Sold 1/3rd of machinery, for ₹ 80,000 on 1st December, 2012)

M2: ₹ 4,00,000 (2/3rd of machinery)

Question 30

The following balances appear in the books of Y Ltd:

Machinery A/c as on 1-4-2014

8,00,000

Provision for Depreciation A/c as on 1-4-2014

3,10,000

On 1-7-2014, a machinery which was purchased on 1-4-2011 for ₹ 1,20,000 was sold for ₹ 50,000 and on the same date another machinery was purchased for ₹ 3,20,000.

The firm has been charging depreciation at 15% p.a. on Original Cost Method and closes its books on 31st March every year. Prepare the Machinery A/c and Provision for Depreciation A/c for the year ending 31st March 2015.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2014

2014

April 1

Balance b/d (6,80,000 + 1,20,000)

8,00,000

July 01

Provision for Depreciation A/c

58,500

July 1

Bank A/c

3,20,000

Bank A/c (Sale)

50,000

Profit and Loss A/c (Loss on Sale)

11,500

2015

March 31

Balance c/d

10,00,000

11,20,000

11,20,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2014

2014

July 1

Machinery A/c (54,000 + 4,500)

58,500

April 1

Balance b/d

3,10,000

2015

2015

March 31

Balance c/d

3,94,000

March 31

Depreciation A/c (WN2)

1,42,500

4,52,500

4,52,500

Working Notes 1: Evaluate Profit & Loss on Sale

Particulars

Amount

Value of Machinery on 1st April, 2011

1,20,000

Less: 3 Years 3 months depreciation

58,500

Value of Machinery 1st July, 2014

61,500

Less: Sale Value

50,000

Loss on Sale

11,500

Working Notes 2: Evaluate depreciation imposed during the year

Particulars

On ₹ 6,80,000 @ 15%

1,02,000

On ₹ 1,20,000 @ 15% for 3 months

4,500

On ₹ 3,20,000 @ 15% for 9 months

36,000

1,42,500

Question 31

On 1st April, 2010, following balances appeared in the books of M/s Krishna Traders:

Furniture Account

50,000

Provision for Depreciation on Furniture Account

22,000

On 1st October, 2010 a part of the Furniture purchased for ₹ 20,000 on 1st April, 2006 was sold for ₹ 5,000. On the same date a new furniture costing ₹ 25,000 was purchased.

The depreciation was provided @ 10% p.a. on the original cost of the asset and no depreciation was charged on the asset in the year of sale. Prepare ‘Furniture Account’ and ‘Provision for Depreciation Account’ for the year ending 31st March, 2011.

Solution:

Furniture Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2010

April 1

Balance b/d (30,000 + 20,000)

50,000

October1

Provision for Depreciation A/c

8,000

October 1

Bank A/c

25,000

October1

Bank A/c (Sale )

5,000

October1

Profit and Loss A/c (Loss on Sale)

7,000

2011

March 31

Balance c/d

55,000

75,000

75,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2010

October1

Furniture A/c

8,000

April 1

Balance b/d

22,000

2011

2011

March 31

Balance c/d

18,250

March 31

Depreciation A/c (WN2)

4,250

26,250

26,250

Working Notes1: Evaluate Profit & Loss on Sale

Particulars

Value of Furniture on 1st April, 2006

20,000

Less: 4 Years depreciation @ 10%

8,000

Value of Furniture on 1st October, 2010

12,000

Less: Sale Value

5,000

Loss on Sale

7,000

Working Notes 2: Depreciation imposed during the year

Particulars

On Rs 30,000 @ 10%

3,000

On Rs 25,000 @ 10% for 6 months

1,250

4,250

Question 32

Books of Mumbai Chemicals Ltd. showed the following balances on 1st April 2012:

Machinery A/c

₹ 10,00,000

Provision for Depreciation A/c

₹ 4,05,000

On 1st April, 2012, a machine which had a cost of ₹ 2,00,000 on 1st October, 2009 was sold for ₹ 80,000. The firm writes off depreciation @ 10% p.a. under the Reducing Balance Method and its accounts are made up on 31st March each year. You are required to prepare the Machinery A/c and Provision for Depreciation A/c for the year ending 31st March, 2013.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

April 1

Balance b/d (8,00,000 + 2,00,000)

10,00,000

April 1

Provision for Depreciation A/c

46,100

Bank A/c (Sale )

80,000

Profit and Loss A/c (Loss on Sale)

73,900

2013

March 31

Balance c/d

8,00,000

10,00,000

10,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

April 1

Machinery A/c

46,100

April 1

Balance b/d

4,05,000

2013

M1

46,100

March 31

Balance c/d

4,03,010

M2

3,28,900

4,05,000

2013

March 31

Depreciation A/c (WN2)

44,110

4,49,110

4,49,110

Working Notes 1: Evaluate Profit & Loss on Sale

Particulars

Value of Machinery on 1st October, 2009

2,00,000

Less: 6 months depreciation

10,000

Value of Machinery on 1st April, 2010

1,90,000

Less: Depreciation

19,000

Value of Machinery on 1st April, 2011

1,71,000

Less: Depreciation

17,100

Value of Machinery on 1st April, 2012

1,53,900

Less: Sale Value

80,000

Loss on Sale

73,900

Working Notes 2: Evaluate depreciation on remaining value of Machinery

Total depreciation on machine sold = 10,000 + 19,000 + 17,1000 = ₹46,100

Accumulated depreciation on remaining machine (₹8,00,000) = 4,05,000 – 46,100 = ₹ 3,58,900

Value of remaining machine on 1st April, 2012 = ₹8,00,000- ₹3,58,900 = ₹4,41,100

DEpriciation on remaining machine on 31st March, 2013 = ₹4.,41,900 X\(\frac{10}{100}\) = ₹ 44,110

Question 33

On 1st July, 2010, X Ltd. purchased a machinery for ₹ 15,00,000. Depreciation is provided @ 20% p.a. on the original cost of the machinery and books are closed on 31st March each year. On 31st May, 2012, a part of this machine purchased on 1st July 2010 for ₹ 3,60,000 was sold for ₹ 2,40,000 and on the same date new machinery was purchased for ₹ 4,20,000. You are required to prepare (a) Machinery Account, (b) Provision for Depreciation Account, and (c) Machinery Disposal Account.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

July 01

Bank A/c (11,40,000 + 3,60,000)

15,00,000

March 31

Balance c/d

15,00,000

15,00,000

15,00,000

2011

2012

April 1

Balance b/d

15,00,000

March 31

Balance c/d

15,00,000

15,00,000

15,00,000

2012

2012

April 1

Balance b/d

15,00,000

May 31

Machinery Disposal A/c

3,60,000

May 31

Bank A/c

4,20,000

2013

March 31

Balance c/d

15,60,000

19,20,000

19,20,000

Machinery Disposal A/c

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

May 31

Machinery A/c

3,60,000

May 31

Provision for Depreciation A/c

1,38,000

May 31

Profit and Loss A/c

(Profit on Sale)

18,000

Bank A/c (Sale)

2,40,000

3,78,000

3,78,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

March 31

Balance c/d

2,25,000

March 31

Balance b/d (for 9 months)

2,25,000

2,25,000

2,25,000

2012

2011

March 31

Balance c/d

5,25,000

April 1

Balance b/d

2,25,000

2012

March 31

Depreciation A/c

3,00,000

5,25,000

5,25,000

2012

2012

May 31

Machine Disposal A/c (54,000

+ 72,000 + 12,000)

1,38,000

April 1

Balance b/d

5,25,000

2013

May 31

Depreciation (for 2 months)

12,000

March 31

Balance c/d

6,97,000

2013

March 31

Depreciation A/c (WN2)

2,98,000

8,35,000

8,35,000

Working Notes 1: Evaluate of Profit & Loss on Sale

Particulars

Value of Machinery on 1st July, 2010

3,60,000

Less: 9 months depreciation

54,000

Value of Machinery on 1st April, 2011

3,06,000

Less: Depreciation

72,000

Value of Machinery on 1st April, 2012

2,34,000

Less: 2 months depreciation

12,000

Value of Machinery on 31st May, 2012

2,22,000

Less: Sale Value

2,40,000

Profit on Sale

18,000

Working Notes 2: Evaluate Depreciation imposed during the year

Particulars

On ₹ 11,40,000 @ 20%

2,28,000

On ₹ 4,20,000 @ 20% for 10 months

70,000

2,98,000

Question 34

ABC Ltd. purchased on 1st April 2006 a small plant for ₹ 1,00,000. On 1st October 2006 an additional plant was purchased costing ₹ 50,000. On 1st October 2007 the plant purchased on 1st April 2006, having become obsolete, was sold for ₹ 40,000.

Depreciation is provided @10% p.a. on original cost on 31st March every year. Show the plant A/c, Provision for Depreciation A/c and Plant Disposal A/c for the Years 2006-07 and 2007-08.

Solution :

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2006

2007

April 1

Bank A/c

1,00,000

Mar. 31

Balance c/d

1,50,000

October 1

Bank A/c

50,000

1,50,000

1,50,000

2007

2007

April 1

Balance b/d

1,50,000

October 1

Plant Disposal A/c

1,00,000

2008

March 31

Balance c/d

50,000

1,50,000

1,50,000

Plant Disposal A/c

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2007

2007

October 1

Plant A/c

1,00,000

October 1

Provision for Depreciation A/c

15,000

Bank A/c (Sale)

40,000

Profit and Loss A/c

(Loss on Sale)

45,000

1,00,000

1,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amoun ₹

Date

Particulars

Amoun ₹

2007

2007

March 31

Balance c/d

12,500

March 31

Balance b/d

12,500

12,500

12,500

2007

2007

October 1

Plant Disposal A/c (10,000+ 5,000)

15,000

April 1

Balance b/d

12,500

2008

October 1

Depreciation A/c

5,000

March 31

Balance c/d

7,500

2008

March 31

Depreciation A/c (WN2)

5,000

22,500

22,500

Working Notes 1:Evaluate Profit & Loss on Sale

Particulars

Value of Machinery on 1st April, 2006

1,00,000

Less: Depreciation

10,000

Value of Machinery on 1st April, 2007

90,000

Less: Depreciation for 6 months

5,000

Value of Machinery on 1st October, 2007

85,000

Less: Sale Value

40,000

Loss on Sale

45,000

Working Note 2: Evaluate depreciation imposed during the year

Depreciation on machine bought on 1st October, 2006 = 50,000 X \(\frac{10}{100}\) = ₹ 5,000

Question 35

On 1st September 2011, Gopal Ltd. purchased a plant for ₹ 10,20,000. On 1st July 2012 another plant was purchased for ₹ 6,00,000. The firm writes off depreciation @ 10% p.a. on original cost and its accounts are closed every year on 31st March. On 1st October 2014, a part of the second plant purchased on 1st July 2012 for ₹ 1,80,000 was sold for ₹ 1,10,000. On 1st December 2014, another plant was purchased for ₹ 3,00,000.

Prepare Plant Account, Provision for Depreciation Account and Plant Disposal Account.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2012

September 1

Bank A/c (P1)

10,20,000

March 31

Balance c/d

10,20,000

10,20,000

10,20,000

2012

2013

April 1

Balance b/d

10,20,000

March 31

Balance c/d

July 1

Bank A/c

P 1

10,20,000

P2

1,80,000

P 2

1,80,000

P3

4,20,000

6,00,000

P 3

4,20,000

16,20,000

16,20,000

16,20,000

2013

2014

April1

Balance b/d

March 31

Balance c/d

16,20,000

P 1

10,20,000

P 1

10,20,000

P 2

1,80,000

P 2

1,80,000

P 3

4,20,000

16,20,000

P 3

4,20,000

16,20,000

16,20,000

16,20,000

2014

2014

April 1

Balance b/d

October 1

Plant Disposal A/c (P2)

1,80,000

P 1

10,20,000

2015

P 2

1,80,000

March 31

Balance c/d

P 3

4,20,000

16,20,000

P 1

10,20,000

December1

Bank A/c (M4)

3,00,000

P 3

4,20,000

P 4

3,00,000

17,40,000

19,20,000

19,20,000

Plant Disposal A/c

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2014

2014

October 1

Plant A/c

1,80,000

October 1

Provision for Depreciation

A/c

40,500

Bank A/c (Sale of P2)

1,10,000

Profit and Loss A/c

(Loss on Sale of P2)

29,500

1,80,000

1,80,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

March 31

Balance c/d

59,500

March 31

Depreciation A/c (for 7 months)

59,500

59,500

59,500

2013

2012

March 31

Balance c/d

2,06,500

April 1

Balance b/d

59,500

2013

March 31

Depreciation A/c

P1

1,02,000

P2 (for 9 months)

13,500

P3 (for 9 months)

31,500

1,47,000

2,06,500

2,06,500

2014

2013

March 31

Balance c/d

3,68,500

April 1

Balance b/d

2,06,500

2014

March 31

Depreciation A/c

P1

1,02,000

P2

18,000

P3

42,000

1,62,000

3,68,500

3,68,500

2014

2014

October 1

Plant Disposal A/c (P2) (13,500

+ 18,000 + 9,000)

40,500

April 1

Balance b/d

3,68,500

2015

October 1

Depreciation A/c (P2) (for 6 months)

9,000

March 31

Balance c/d

4,91,000

2015

March 31

Depreciation A/c

P1

1,02,000

P3

42,000

P4 (for 4 months)

10,000

1,54,000

5,31,500

5,31,500

Working Note: Evaluate P2 Profit & Loss on Sale

Particulars

Value of Plant on 1st July, 2012

1,80,000

Less: 9 months depreciation @ 10%

13,500

Value of Plant on 1st April, 2013

1,66,500

Less: Depreciation @ 10%

18,000

Value of Plant on 1st April, 2014

1,48,500

Less: 6 months depreciation @ 10%

9,000

Value of Plant on 1st October, 2014

1,39,500

Less: Sale Value

1,10,000

Loss on Sale

29,500

Note: Plant bought on 1st July, 2012 is divided into P2 and P3.

P2: ₹ 1,80,000 (sold for ₹ 1,10,000 on 1st October, 2014)

P3: ₹ 4,20,000

Question 36

On 1st June, 2010, Kedarnath Ltd. purchased a machinery for ₹ 27,00,000. Depreciation is provided @ 10% p.a. on diminishing balance method and the books are closed on 31st March each year. On 1st October, 2012, a part of the machinery purchased on 1st June, 2010 for ₹ 6,00,000 was sold for ₹ 3,50,000 and on the same date another machinery was purchased for ₹ 8,00,000. You are required to show (i) Machinery A/c, (ii) Provision for Dep. A/c, and (iii) Machinery Disposal A/c.

Solution :

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2010

2011

June 1

Bank A/c

March 31

Balance c/d

M1

6,00,000

M1

6,00,000

M2

21,00,000

27,00,000

M2

21,00,000

27,00,000

27,00,000

27,00,000

2011

2012

April 1

Balance b/d

March 31

Balance c/d

M1

6,00,000

M1

6,00,000

M2

21,00,000

27,00,000

M2

21,00,000

27,00,000

27,00,000

27,00,000

2012

2012

March31

Balance b/d

October 1

Machinery Disposal A/c (M1)

6,00,000

M1

6,00,000

2013

M2

21,00,000

27,00,000

March 31

Balance c/d

October 1

Bank A/c (M3)

8,00,000

M2

21,00,000

M3

8,00,000

29,00,000

35,00,000

35,00,000

Machinery Disposal A/c

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

October 1

Machinery A/c

6,00,000

October 1

Provision for Depreciation A/c

1,29,750

Bank A/c (Sale of M1)

3,50,000

Profit and Loss A/c (Loss on Sale of M1)

1,20,250

6,00,000

6,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

March 31

Balance c/d

2,25,000

March 31

Balance b/d

M1(for 10 months)

50,000

M2 (for 10 months)

1,75,000

2,25,000

2,25,000

2,25,000

2012

2011

March 31

Balance c/d

4,72,500

April1

Balance b/d

2,25,000

2012

March 31

Depreciation A/c

M1

55,000

M2

1,92,500

2,47,500

4,72,500

4,72,500

2012

2012

October1

Machine Disposal A/c (M1) (50,000 +

55,000 + 24,750)

1,29,750

April1

Balance b/d

4,72,500

2013

October1

Depreciation (M1)

24,750

March 31

Balance c/d

5,80,750

2013

March 31

Depreciation A/c (M1) (for 6 months)

M2

1,73,250

M3 (for 6 months)

40,000

2,13,250

7,10,500

7,10,500

Working Note: Evaluate M1 Profit & Loss on Sale

Particulars

Value of Machinery on 1st June, 2010

6,00,000

Less: 10 months depreciation @ 10%

50,000

Value of Machinery on 1st April, 2011

5,50,000

Less: Depreciation @ 10%

55,000

Value of Machinery on 1st April, 2012

4,95,000

Less: 6 months depreciation @ 10%

24,750

Value of Machinery on 1st October, 2012

4,70,250

Less: Sale Value

3,50,000

Loss on Sale

1,20,250

Note: Machinery bought on 1st June, 2010 is divided into M1 and M2.

M1: ₹ 6,00,000 (sold for ₹ 3,50,000 on 1st October, 2012)

M2:₹ 21,00,000

Question 37

On 1st Jan. 2012, Panjim Dryfruits Ltd. bought a plant for ₹ 15,00,000. The company writes off depreciation @ 20% p.a. on Written Down Value Method and closes its books on 31st March every year. On 1st Oct. 2014, a part of the plant purchased on 1st Jan. 2012 for ₹ 3,00,000 was sold for ₹ 1,75,000. On 1st Jan. 2015 a fresh plant was purchased for ₹ 5,00,000. Prepare Plant A/c, Provision for Dep. A/c and Plant Disposal A/c.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

January1

Bank A/c

March 31

Balance c/d

P1

3,00,000

P1

3,00,000

P2

12,00,000

15,00,000

P2

12,00,000

15,00,000

15,00,000

15,00,000

2012

2013

April 1

Balance b/d

March 31

Balance c/d

P1

3,00,000

P1

3,00,000

P2

12,00,000

15,00,000

P2

12,00,000

15,00,000

15,00,000

15,00,000

2013

2014

April 1

Balance b/d

March 31

Balance c/d

P1

3,00,000

P1

3,00,000

P2

12,00,000

15,00,000

P2

12,00,000

15,00,000

15,00,000

15,00,000

2014

2014

April 1

Balance b/d

October1

Plant Disposal A/c (P1)

3,00,000

P1

3,00,000

2015

P2

12,00,000

15,00,000

March 31

Balance c/d

2015

P2

12,00,000

January 1

Bank A/c (P3)

5,00,000

P3

5,00,000

17,00,000

20,00,000

20,00,000

Plant Disposal A/c

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2014

2014

October 1

Plant A/c

3,00,000

October 1

Provision for Depreciation A/c

1,35,840

Profit and Loss A/c

(Profit on Sale of P1)

10,840

Bank A/c (Sale of P1)

1,75,000

3,10,840

3,10,840

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

March31

Balance c/d

75,000

March 31

Depreciation A/c

P1 (for 3 months)

15,000

P2 (for 3 months)

60,000

75,000

75,000

75,000

2013

2012

March31

Balance c/d

3,60,000

April 1

Balance b/d

75,000

2013

March 31

Depreciation A/c

P1

57,000

P2

2,28,000

2,85,000

3,60,000

3,60,000

2014

2013

March31

Balance c/d

5,88,000

April 1

Balance b/d

3,60,000

2014

March 31

Depreciation A/c

P1

45,600

P2

1,82,400

2,28,000

5,88,000

5,88,000

2014

2014

October 1

Plant Disposal A/c (P1) (15,000+57,000+45,600+18,240)

1,35,840

April 1

Balance b/d

5,88,000

2015

October 1

Depreciation A/c (M1) (for 6 months)

18,240

March 31

Balance c/d

6,41,320

2015

March 31

Depreciation A/c

21

1,45,920

P 3 (for 3 months)

25,000

1,70,920

7,77,160

7,77,160

Working Notes: Evaluate P1 Profit & Loss on Sale

Particulars

Value of Plant on 1st January, 2012

3,00,000

Less: 3 months depreciation

15,000

Value of Plant on 1st April, 2012

2,85,000

Less: Depreciation

57,000

Value of Plant on 1st April, 2013

2,28,000

Less: Depreciation

45,600

Value of Plant on 1st April, 2014

1,82,400

Less: 3 months depreciation

18,240

Value of Plant on 1st October, 2014

1,64,160

Less: Sale Value

1,75,000

Profit on Sale

10,840

Note: Plant bought on 1st January, 2012 is divided into P1 and P2.

P1: ₹ 3,00,000 (sold for ₹ 1,75,000 on1st October, 2014)

P2: ₹ 12,00,000

Question 38

The following balances appear in the books of M/s Amrit:

1st April, 2004

Machinery A/c

60,000

1st April, 2004

Provision for depreciation A/c

36,000

On 1st April, 2004, they decided to dispose off a machinery for ₹ 8,400 which was purchased on 1st April, 2000 for ₹ 16,000.

You are required to prepare Machinery A/c, Provision for Depreciation A/c and Machinery Disposal A/c for 2004-05. Depreciation was charged at 10% p.a on original cost method.

Answer:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2004

2004

April 1

Balance b/d

60,000

April1

Machinery Disposal A/c

16,000

2005

March 31

Balance c/d

44,000

60,000

60,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2004

2004

April1

Machinery Disposal A/c

(1,600 × 4)

6,400

April 1

Balance b/d

36,000

2005

2005

March 31

Balance c/d

34,000

March 31

Depreciation A/c (WN2)

4,400

40,400

40,400

Machinery Disposal Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2004

2004

April 1

Machinery A/c

16,000

April 1

Provision for Depreciation A/c

6,400

April 1

Bank A/c (Sale)

8,400

April 1

Profit and Loss A/c

(Loss on Sale)

1,200

16,000

16,000

Working Notes 1: Evaluate Profit & Loss on Sale

Particulars

Value of Furniture on 1st April, 2004

16,000

Less: 4 years depreciation @ 10% p.a.

6,400

Value of Furniture on 1st April, 2004

9,600

Less: Sale Value

8,400

Loss on Sale

1,200

Working Notes 2: Evaluate depreciation on remaining value of Machinery

Depreciation on remaining machine on 31st ,MAarch, 2005 = 44,000 X \(\frac{10}{100}\) = ₹4,400

Question 39

On 1.10.2008, X Ltd. purchased a machinery for ₹ 2,50,000. A part of machinery which was purchased for ₹ 20,000 on 1.10.2008 became obsolete and was disposed off on 1.1.2011 (having a book value of ₹ 17,100 on 1.4.2010) 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.

Solution:

Machinery Disposal Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2011

January1

Machinery A/c

15,817

January1

Provision for Depreciation A/c

(1,000 + 1,900 + 1,283)

4,183

January1

Bank A/c (Sale)

2,000

Profit and Loss A/c (Loss on Sale)

13,817

15,817

15,817

Working Note: Evaluate Profit & Loss on Sale

Particulars

Value of Machinery on 1st October, 2008

20,000

Less: 6 months depreciation

1,000

Value of Machinery on 1st April, 2009

19,000

Less: Depreciation

1,900

Value of Machinery on 1st April, 2010

17,100

Less: 9 months depreciation

1,283

Value of Machinery on 1st January, 2011

15,817

Less: Sale Value

2,000

Loss on Sale

13,817

Question 40

A limited company purchased on 01-01-2009 a plant for ₹ 38,000 and spent ₹ 2,000 for carriage and brokerage. On 01-04-2010 it purchased additional plant costing ₹ 20,000. On 01-08-2011 the plant purchased on 01-04-2009 was sold for ₹ 25,000. On the same date, the plant purchased on 01-04-2010 was sold at a profit of ₹ 2,800. Depreciation is provided @10% per annum on diminishing balance method every year. Accounts are closed on 31st December every year. Show the plant A/c for 3 years.

Solution:

Plant Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2009

2009

January1

Bank A/c (P1) (38,000 + 2,000)

40,000

December 31

Depreciation A/c

4,000

Balance c/d

36,000

40,000

40,000

2010

2010

January 1

Balance b/d

36,000

December 31

Depreciation A/c

April 1

Bank A/c (P2)

20,000

P1

3,600

P2 (for 9 months)

1,500

5,100

December 31

Balance c/d

P1

32,400

P2

18,500

50,900

56,000

56,000

2011

2011

January1

Balance b/d

August 1

Depreciation A/c (P1)

1,890

P1

32,400

Bank A/c (Sale of P1)

25,000

P2

18,500

50,900

Profit and Loss A/c (Loss on Sale of P1)

5,510

August1

Profit and Loss A/c (Profit on Sale of P2)

2,800

August 1

Depreciation A/c (P2)

1,080

Bank A/c (Sale of P2)

20,220

53,700

53,700

Working Notes 1: Evaluate P1 Profit & Loss on Sale

Particulars

Value of Plant on 1st April, 2011

32,400

Less: 7 months depreciation

1,890

Value of Plant on 1st August, 2011

30,510

Less: Sale Value

25,000

Loss on Sale

5,510

Working Note 2: Evaluate P2 Sale Price

Particulars

Value of Plant on 1st April, 2011

18,500

Less: 7 months depreciation

1,080

Value of Plant on 1st August, 2011

17,420

Add: Profit on Sale

2,800

Sale Value

20,220

Question 41

On 1st April 2008, Verma & Co. purchased two machines of ₹ 40,000 each. On 1st July 2009 and 1st Oct. 2009 additional machinery were purchased for ₹ 30,000 and ₹ 20,000 respectively. On 1st April 2010 one of the machines purchased on 1st April 2008 became obsolete and was sold for ₹ 21,000. Depreciation is charged @ 15% p.a. on written down value method on 31st March each year. You are required to prepare Machinery Account for 3 years.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2008

2009

April 1

Bank A/c

March 31

Depreciation A/c

M1

40,000

M1

6,000

M2

40,000

80,000

M2

6,000

12,000

March 31

Balance c/d

M1

34,000

M2

34,000

68,000

80,000

80,000

2009

2010

April 1

Balance b/d

March 31

Depreciation A/c

M1

34,000

M1

5,100

M2

34,000

68,000

M2

5,100

July 1

Bank A/c (M3)

30,000

M3 (for 9 months)

3,375

October 1

Bank A/c (M4)

20,000

M4 (for 6 months)

1,500

15,075

March 31

Balance c/d

M1

28,900

M2

28,900

M3

26,625

M4

18,500

1,02,925

1,18,000

1,18,000

2010

2010

April 1

Balance b/d

April 1

Bank A/c (Sale of M1)

21,000

M1

28,900

Profit and Loss A/c (Loss on Sale of M1)

7,900

M2

28,900

2011

M3

26,625

March 31

Depreciation A/c

M4

18,500

1,02,925

M2

4,335

M3

3,994

M4

2,775

11,104

March 31

Balance c/d

M2

24,565

M3

22,631

M4

15,725

62,921

1,02,925

1,02,925

Working Notes: Evaluate M1 Profit & Loss on Sale

Particulars

Value of Machinery on 1st April, 2010

28,900

Less: Sale Value

21,000

Loss on Sale

7,900

Question 42

A Limited purchased a machine on 1st July 2011 for ₹ 3,00,000 and on 1st January 2013 bought another machinery for ₹ 2,00,000. On 1st August 2013 machine bought in 2011 was sold for ₹ 1,60,000. Another machine was bought for ₹ 1,50,000 on 1st October 2013. It was decided to provide depreciation @ 10% p.a. on written down value method assuming books are closed on 31st March each year. Prepare Machinery Account and Provision for depreciation account for 3 years.

Solution:

Machinery Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2011

2012

July 1

Bank A/c (M1)

3,00,000

March 31

Balance c/d

3,00,000

3,00,000

3,00,000

2012

2013

April 1

Balance b/d

3,00,000

March 31

Balance c/d

2013

M1

3,00,000

January1

Bank A/c (M2)

2,00,000

M2

2,00,000

5,00,000

5,00,000

5,00,000

2013

2013

Apr. 01

Balance b/d

5,00,000

August 1

Provision for Depreciation A/c

(on M1 for 4 months)

58,575

M1

3,00,000

Bank A/c (Sale of M1)

1,60,000

M2

2,00,000

Profit and Loss A/c (Loss on Sale)

81,425

2014

October 1

Bank A/c (M3)

1,50,000

March 31

Balance c/d

M2

2,00,000

M3

1,50,000

3,50,000

6,50,000

6,50,000

Working Notes: Evaluate Profit or Loss on Sale

Particulars

Value of M1 as on 1st July, 2011

3,00,000

Less: Depreciation

58,575

Value of M1 as on 1st August, 2013

2,41,425

Less: Sale Value

1,60,000

Loss on Sale

81,425

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

Amount ₹

Date

Particulars

Amount ₹

2012

2012

March 31

Balance c/d

22,500

March 31

Depreciation A/c

22,500

22,500

22,500

2013

2012

March 31

Balance c/d

April 1

Balance b/d

22,500

M1

50,250

2013

M2

5,000

55,250

March 31

Depreciation A/c

M1

27,750

M2

5,000

32,750

55,250

55,250

2013

2013

August1

Machinery A/c

58,575

April 1

Balance b/d

2014

M1

50,250

March 31

Balance c/d

M2

5,000

55,250

M2

24,500

August 1

Depreciation A/c (M1)

8,325

M3

7,500

32,000

2014

March 31

Depreciation A/c

M2

19,500

M3

7,500

27,000

90,575

90,575

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