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Question

A company whose accounting year is a financial year, purchased on 1st July, 2014 machinery costing ₹ 30,000.
It purchased further machinery on 1st January, 2015 costing ₹ 20,000 and on 1st October, 2015 costing ₹ 10,000.
On 1st April, 2016, one-third of the machinery installed on 1st July, 2014 became obsolete and was sold for ₹ 3,000.
Show how Machinery Account would appear in the books of the company. It being given that machinery was depreciated by Fixed Instalment Method at 10% p.a. What would be the value of Machinery Account on 1st April, 2017?

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Solution

Machinery Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

(Rs)

Date

Particulars

J.F.

Amount

(Rs)

2014

2015

July 01

Bank (I)

30,000

March 31

Depreciation

2015

Jan. 01

Bank (II)

20,000

I (for 9 months)

2,250

II

500

2,750

March 31

Balanced c/d

I

27,750

II

19,500

47,250

50,000

50,000

2015

2016

April 01

Balance b/d

March 31

Depreciation

I

27,750

I

3,000

II

19,500

47,250

II

2,000

III

500

5,500

Oct. 01

Bank (III)

10,000

March 31

Balance c/d

I

24,750

II

17,500

III

9,500

51,750

57,250

57,250

2016

2016

April 01

Balance b/d

April 01

Bank I(1/3rd portion)

3,000

I

24,750

April 01

Profit and Loss (Loss on Sale of I)

5,250

2017

II

17,500

March 31

Depreciation

III

9,500

51,750

I (on 2/3rd portion)

2,000

II

2,000

III

1,000

5,000

March 31

Balance c/d

I (on 2/3rd portion)

14,500

II

15,500

III

8,500

38,500

51,750

51,750

Working Notes

1. Calculation of Depreciation

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

Particulars

Amount (Rs)

Book Value of 1/3rd portion of Machine I on April 01, 2016 (24,750 × 1/3)

8,250

Less: Sale Value

(3,000)

Loss on sale

5,250


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