Question

A machine was purchased on 1st April, 2014 for Rs. 10,00,000. On 1st October, 2014 another machine was purchased for Rs. 6,00,000. Estimated scrap values were Rs. 40,000 and Rs. 20,000 respectively. Depreciation is to be provided @ 10 % per annum on the machines under the fixed instalment method.
(i) Show the machinery account for the year ended 31st March, 2015 and 2016.
(ii) Show how the machinery account will appear in the balance sheet as at 31st March, 2016.

Answer 1

$\begin{array}{cccccccc}\text{Dr}& & & & \text{Machinery Account}& & & \text{Cr}\end{array}\begin{array}{ccccccccccccccccc}\text{Date}& \text{Particulars}& & \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& & \text{JF}& \text{Amt. (Rs)}& & & & & & & \\ 2014& & & & & 2015& & & & & & & & & & & \\ \text{Apr 1}& \text{To Bank A/c(Match A)}& & & 10,00,000& \text{Mar 31}& \text{By Depreciation A/c}& & & & & & & & & & \\ & & & & & & \text{Mach A}& 1,00,000& & & & & & & & & \\ & & & & & & \text{Mach B}& \underset{–}{30,000}& & 1,30,000& & & & & & & \\ \text{Oct 1}& \text{To Bank A/c(Match B)}& & & 6,00,000& \text{Mar 31}& \text{By Balance c/d}& & & & & & & & & & \\ & & & & & & \text{Mach A}& 9,00,000& & & & & & & & & \\ & & & & & & \text{Mach B}& \underset{–}{5,70,000}& & 14,70,000& & & & & & & \\ & & & & \overline{\underset{–}{\underset{–}{16,00,000}}}& & & & & \overline{\underset{–}{\underset{–}{16,00,000}}}& & & & & & & \\ 2015& & & & & 2016& & & & & & & & & & & \\ \text{Apr 1}& \text{To Balance b/d}& & & & \text{Mar 31}& \text{By Depreciation A/c (WN 1)}& & & & & & & & & & \\ & \text{Mach A}& 9,00,000& & & & \text{Mach A}& 1,00,000& & & & & & & & & \\ & \text{Mach B}& \underset{–}{5,70,000}& & 14,70,000& & \text{Mach B}& \underset{–}{60,000}& & 1,60,000& & & & & & & \\ & & & & & \text{Mar 31}& \text{By Balance c/d}& & & & & & & & & & \\ & & & & & & \text{Mach A}& 8,00,000& & & & & & & & & \\ & & & & & & \text{Mach B}& \underset{–}{5,10,000}& & 13,10,000& & & & & & & \\ & & & & \underset{–}{\overline{\underset{–}{14,70,000}}}& & & & & \underset{–}{\overline{\underset{–}{14,70,000}}}& & & & & & & \\ 2016& & & & & & & & & & & & & & & & \\ \text{Apr 1}& \text{To Balance b/d}& & & & & & & & & & & & & & & \\ & \text{Mach A}& 8,00,000& & & & & & & & & & & & & & \\ & \text{Mach B}& \underset{–}{5,10,000}& & 13,10,000& & & & & & & & & & & & \end{array}$

Balance Sheet (Extract) as at 31st March, 2016.

$\begin{array}{ccccc}\text{Liabilities}& \text{Amt. (Rs)}& \text{Assets}& & \text{Amt. (Rs)}\\ & & \text{Machinery}& & \\ & & \text{A}& 8,00,000& \\ & & \text{A}& \underset{–}{5,10,000}& 13,10,000\end{array}$

Working note

Depreciation on Machinery A = 10,00,000 $\times \frac{10}{100}$ = Rs. 1,00,000.

Depreciation on Machinery B

(a) For year ended 2015 = 6,00,000 $\times \frac{10}{100}\times \frac{6}{12}$ = Rs. 30,000

(b) For subsequent year = 6,00,000 $\times \frac{10}{100}$ = Rs. 60,000