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 BYJUâ€™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 â‚¹ 1,90,000 and spent â‚¹ 10,000 on its installation. At the date of purchase, it was estimated that the scrap value of the machine would be â‚¹ 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 â‚¹ Date 2017 Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 = $\frac{Cost\, of\, Asset-Scrap\, Value}{Estimated\, Useful\, Life\, of\, Asset}$

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

= â‚¹ 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 â‚¹ 68,000. It is estimated that its working life is 10 years, at the end of which it will fetch â‚¹ 8,000. Additions are made on 1st April, 2010 to the value of â‚¹ 40,000 (Residual value â‚¹ 4,000). More additions are made on Oct. 1, 2011 to the value of â‚¹ 9,800 (Break up value â‚¹ 800). 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 â‚¹ 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 = $\frac{68,000-8,000}{10}$

= â‚¹ 6,000

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

= â‚¹ 1,800

P3 = $\frac{9,800-800}{20}$

= â‚¹ 450

Question 3

Chandra Ltd. purchased a second-hand machine for â‚¹ 8,000 plus CGST and SGST @ 6% each on 1st July, 2015. They spent â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 5,00,000 on 1st April, 2012. Further addition were made on 1st October 2012 and on 1st July 2013 for â‚¹ 4,00,000 and â‚¹ 3,00,000 respectively. On 1st January, 2015, 1st machine was sold for â‚¹ 2,85,000 and new machine was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 2,40,000 and spent â‚¹ 10,000 on its erection. On 1st July, 2006 an additional machinery costing â‚¹ 1,00,000 was purchased. On 1st July, 2008 the machine purchased on 1st January, 2006 was sold for â‚¹ 1,43,000 and on the same date, a new machine was purchased at a cost of â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 80,000. On 1st October, 2010, it purchased another machine for â‚¹ 50,000 and on 1st October, 2011, it sold off the first machine purchased in 2009 for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 54,000 and spent â‚¹ 6,000 on its installation. On the 1st of December, 2010, it purchased another machine for â‚¹ 30,000.

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

On December 1, 2012, the second machine (purchased on December 1, 2010) was also sold off for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 40,000. On 1st October, 2011, it buys additional machinery worth â‚¹ 10,000. On 30th September, 2012, half of the machinery purchased on 1st Oct., 2009, is sold for â‚¹ 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 â‚¹ 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 â‚¹ 8,200

M2, is still in the business.

Question 9

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

On 1st January, 2013, a machinery of the original value of â‚¹ 20,000 which was included in the machinery purchased on 1st April, 2010, was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 20,000 (sold for Rs 6,000)

M2: â‚¹ 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 â‚¹ 40,000. (ii) Spent â‚¹ 10,000 on repairs to make it serviceable. Sept.30 Purchased additional new machinery for â‚¹ 20,000. Dec. 31 Repairs and renewals of machinery â‚¹ 2,000. March 31 Depreciate the machinery at 10% p.a.

Solution:

 MachineryAccount Dr. Cr. Date Particulars Amount â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 1,50,000 and paid â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 30,000 and immediately spent â‚¹ 4,000 on its repair and â‚¹ 1,000 on its installation. On Oct. 1, 2018, the machine was sold for â‚¹ 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 (â‚¹) Date Particulars Amount (â‚¹) 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 â‚¹ 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 â‚¹ 36,000 and spent â‚¹ 4,000 on its installation. On 1st Oct. in the same year another Machinery costing â‚¹ 20,000 was purchased. On 1st Oct., 2011, the Machinery bought on 1st April, 2009 was sold off for â‚¹ 12,000 and on the same date a fresh Machine was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 50,000 on 1st Oct., 2007. Another machinery costing â‚¹ 10,000 was purchased on 1st Dec., 2008. On 31st March, 2010, the machinery purchased in 2007 was sold at a loss of â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 2,40,000 and spent â‚¹ 4,000 on its carriage and â‚¹ 6,000 towards installation cost. On 1st July, 2011 it purchased a second hand machinery for â‚¹ 75,000 and spent â‚¹ 25,000 on its overhauling.

On 1st January, 2013 it decided to sell the machinery bought on 1st April, 2010 at a loss of â‚¹ 20,000. It bought another machine on the same date for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 90,000 each on 1st April 2011. On 1st October 2013 one of the Trucks was involved in an accident and is completely destroyed. â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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: â‚¹ 90,000 (sold for â‚¹ 56,200)

T2: â‚¹ 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 â‚¹ 50,000. On 1-10-2010, it purchased an additional machine for â‚¹ 30,000. The part of the machine which was purchased on 1-4-2009 costing â‚¹ 10,000 was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 10,000 (sold for â‚¹ 3,600)

M2: â‚¹ 40,000

Question 19

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

M2: 2/3rd value i.e. â‚¹ 40,000 (is in the business)

Question 20

On July 1, 2005 Pushpak Ltd. purchased a machinery for â‚¹ 5,70,000 and paid â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 3,00,000 and â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 30,000 and on 1st April, 2011 a second machine was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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: â‚¹ 50,000 (sold for â‚¹ 30,000 on 1st October, 2010)

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

M3:â‚¹ 2,00,000 (is the 4machines cost)

Question 23

On 1st July 2016, ABC Ltd. purchase 4 machines for â‚¹ 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 â‚¹ 50,000 and on 1st January, 2010 a second machine was sold for â‚¹ 40,000. Another machine with a higher capacity which cost â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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: â‚¹ 80,000 (sold for â‚¹ 50,000 on 1st April, 2008)

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

M3: â‚¹ 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 â‚¹ 4,40,000. It purchased further machinery on 1st April, 2012 costing â‚¹ 5,20,000. On 30th June, 2013, the first machine was sold for â‚¹ 2,50,000 and on the same date a fresh machine was installed at a cost of â‚¹ 3,00,000. On 1st July 2014, the second machine purchased on 1st April 2012 was also sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 5,85,000 and immediately spent â‚¹ 15,000 on its erection. On 1st October, 2010, it purchased another machine for â‚¹ 4,00,000. On 31st July, 2011, it sold off the first machine for â‚¹ 2,50,000 and bought another for â‚¹ 4,20,000. On 1st November, 2012, the second machine was also sold off for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 5,00,000. It purchased another plant on 1st September, 2010 costing â‚¹ 3,00,000. On 31st December, 2012, the plant purchased on 1st July, 2010 got out of order and was sold for â‚¹ 2,15,000. Another plant was purchased to replace the same for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 1,80,000 was sold for â‚¹ 1,00,000 and on the same date a new plant was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 1,80,000 (sold for â‚¹1,00,000 on 1st July, 2012)

P2: â‚¹ 10,20,000

Question 28

On 1st April 2012, Banglore Silk Ltd. purchased a machinery for â‚¹ 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 â‚¹ 4,00,000 was sold for â‚¹ 3,20,000. On 1st November 2014, a new machinery was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 4,00,000 (sold for â‚¹ 3,20,000 on 1st July, 2014)

M2: â‚¹ 16,00,000

Question 29

Binny Textiles Ltd. which depreciates its machinery at 20% p.a. on diminishing balance method, purchased a machine for â‚¹ 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 â‚¹ 1,50,000. On 1st December, 2012, one-third of the machinery purchased on 1st October, 2010 was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 2,00,000 (Sold 1/3rd of machinery, for â‚¹ 80,000 on 1st December, 2012)

M2: â‚¹ 4,00,000 (2/3rd of machinery)

Question 30

The following balances appear in the books of Y Ltd:

 â‚¹ 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 â‚¹ 1,20,000 was sold for â‚¹ 50,000 and on the same date another machinery was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ On â‚¹ 6,80,000 @ 15% 1,02,000 On â‚¹ 1,20,000 @ 15% for 3 months 4,500 On â‚¹ 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:

 â‚¹ Furniture Account 50,000 Provision for Depreciation on Furniture Account 22,000

On 1st October, 2010 a part of the Furniture purchased for â‚¹ 20,000 on 1st April, 2006 was sold for â‚¹ 5,000. On the same date a new furniture costing â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 10,00,000 Provision for Depreciation A/c â‚¹ 4,05,000

On 1st April, 2012, a machine which had a cost of â‚¹ 2,00,000 on 1st October, 2009 was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 = â‚¹46,100

Accumulated depreciation on remaining machine (â‚¹8,00,000) = 4,05,000 – 46,100 = â‚¹ 3,58,900

Value of remaining machine on 1st April, 2012 = â‚¹8,00,000- â‚¹3,58,900 = â‚¹4,41,100

DEpriciation on remaining machine on 31st March, 2013 = â‚¹4.,41,900 X$\frac{10}{100}$ = â‚¹ 44,110

Question 33

On 1st July, 2010, X Ltd. purchased a machinery for â‚¹ 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 â‚¹ 3,60,000 was sold for â‚¹ 2,40,000 and on the same date new machinery was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ On â‚¹ 11,40,000 @ 20% 2,28,000 On â‚¹ 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 â‚¹ 1,00,000. On 1st October 2006 an additional plant was purchased costing â‚¹ 50,000. On 1st October 2007 the plant purchased on 1st April 2006, having become obsolete, was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amoun â‚¹ 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 â‚¹ 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 $\frac{10}{100}$ = â‚¹ 5,000

Question 35

On 1st September 2011, Gopal Ltd. purchased a plant for â‚¹ 10,20,000. On 1st July 2012 another plant was purchased for â‚¹ 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 â‚¹ 1,80,000 was sold for â‚¹ 1,10,000. On 1st December 2014, another plant was purchased for â‚¹ 3,00,000.

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

Solution:

 Plant Account Dr. Cr. Date Particulars Amount â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 1,80,000 (sold for â‚¹ 1,10,000 on 1st October, 2014)

P3: â‚¹ 4,20,000

Question 36

On 1st June, 2010, Kedarnath Ltd. purchased a machinery for â‚¹ 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 â‚¹ 6,00,000 was sold for â‚¹ 3,50,000 and on the same date another machinery was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 6,00,000 (sold for â‚¹ 3,50,000 on 1st October, 2012)

M2:â‚¹ 21,00,000

Question 37

On 1st Jan. 2012, Panjim Dryfruits Ltd. bought a plant for â‚¹ 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 â‚¹ 3,00,000 was sold for â‚¹ 1,75,000. On 1st Jan. 2015 a fresh plant was purchased for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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: â‚¹ 3,00,000 (sold for â‚¹ 1,75,000 on1st October, 2014)

P2: â‚¹ 12,00,000

Question 38

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

 â‚¹ 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 â‚¹ 8,400 which was purchased on 1st April, 2000 for â‚¹ 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.

 Machinery Account Dr. Cr. Date Particulars Amount â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 2004 2004 April1 Machinery Disposal A/c (1,600 Ã— 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 $\frac{10}{100}$ = â‚¹4,400

Question 39

On 1.10.2008, X Ltd. purchased a machinery for â‚¹ 2,50,000. A part of machinery which was purchased for â‚¹ 20,000 on 1.10.2008 became obsolete and was disposed off on 1.1.2011 (having a book value of â‚¹ 17,100 on 1.4.2010) for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 38,000 and spent â‚¹ 2,000 for carriage and brokerage. On 01-04-2010 it purchased additional plant costing â‚¹ 20,000. On 01-08-2011 the plant purchased on 01-04-2009 was sold for â‚¹ 25,000. On the same date, the plant purchased on 01-04-2010 was sold at a profit of â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 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 â‚¹ 40,000 each. On 1st July 2009 and 1st Oct. 2009 additional machinery were purchased for â‚¹ 30,000 and â‚¹ 20,000 respectively. On 1st April 2010 one of the machines purchased on 1st April 2008 became obsolete and was sold for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ 3,00,000 and on 1st January 2013 bought another machinery for â‚¹ 2,00,000. On 1st August 2013 machine bought in 2011 was sold for â‚¹ 1,60,000. Another machine was bought for â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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 â‚¹ 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 â‚¹ Date Particulars Amount â‚¹ 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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