Question

Berlia Ltd purchased a second hand machine for Rs 56,000 on July 1, 2001 and spent Rs 24,000 on its repair and installation and Rs 5,000 for its carriage. On September 1, 2002, it purchased another machine for Rs 2,50,000 and spent Rs 10,000 on its installation.

(a) Depreciation is provided on machinery @ $10\%$ per annum on original cost method annually on December 31. Prepare Machinery account and Depreciation account from the year 2001 to 2004.

(b) Prepare Machinery account and Depreciation account from the year 2001 to 2004. If depreciation is provided on machinery @ $10\%$ per annum on written down value method annually on December 31.

Answer 1

Answer (a)

Dr Machinery Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Jul 1}& \text{Bank A/c}& & & \text{Dec 31}& \text{Depreciation A/c}& & 4,250\\ & \text{Machine (i)}& & 85,000& & & & \\ & [56,000]& & & & & & \\ & 24,000+5,000]& & & \text{Dec 31}& \text{Balance c/d}& & 80,750\\ & & & \underset{–}{\overline{85,500}}& & & & \underset{–}{\overline{85,500}}\\ 2002& & & & 2002& & & \\ \text{Jan 1}& \text{Balance b/d}& & 80,750& \text{Dec 31}& \text{Depreciation A/c}& & \\ & \text{Machine (i)}& & & & \text{Machine (i)}8,500& & \\ \text{Sep 1}& \text{Bank A/c}& & & & \text{Machine (ii)}\underset{–}{8,667}& & 17,167\\ & \text{Machine (ii)}& & & & & & \\ & (2,50,000+10,000)& & 2,60,000& 2002& & & \\ & & & & \text{Dec 31}& \text{Balance c/d}& & \\ & & & & & \text{Machine (i)}72,250& & \\ & & & & & \text{Machine (ii)}\underset{–}{2,51,333}& & 3,23,583\\ & & & \underset{–}{\overline{3,40,750}}& & & & \underset{–}{\overline{3,40,750}}\\ 2003& & & & 2003& & & \\ \text{Jan 1}& \text{Balance b/d}& & & \text{Dec 31}& \text{Depreciation A/c}& & \\ & \text{Machine (i)}72,250& & & & \text{Machine (i)}8,500& & \\ & \text{Machine (ii)}\underset{–}{2,51,333}& & 3,23,583& & \text{Machine (ii)}\underset{–}{26,000}& & 34,500\\ & & & & \text{Dec 31}& \text{Balance c/d}& & \\ & & & & & \text{Machine (i)}63,750& & \\ & & & & & \text{Machine (ii)}\underset{–}{2,25,333}& & 2,89,083\\ & & & \underset{–}{\overline{3,23,583}}& & & & \underset{–}{\overline{3,23,583}}\\ 2004& & & & 2004& & & \\ \text{Jan 1}& \text{Balance b/d}& & & \text{Dec 31}& \text{Depreciation A/c}& & \\ & \text{Machine (i)}63,750& & & & \text{Machine (i)}8,500& & \\ & \text{Machine (ii)}\underset{–}{2,25,333}& & 2,89,083& & \text{Machine (ii)}\underset{–}{26,000}& & 34,500\\ & & & & & \text{Balance c/d}& & \\ & & & & & \text{Machine (i)}55,250& & \\ & & & & & \text{Machine (ii)}\underset{–}{1,99,333}& & 2,54,583\\ & & & \underset{–}{\overline{2,89,083}}& & & & \underset{–}{\overline{2,89,083}}\end{array}$

Dr Depreciation Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& \text{Machinery A/c}& & 4,250& 2001& & & \\ \text{Dec 31}& & & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 4,250\\ & & & \underset{–}{\overline{4,250}}& & & & \underset{–}{\overline{4,250}}\\ 2002& & & & 2002& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 17,167\\ & M_1=8,500& & & & & & \\ & M_2=\underset{–}{8,667}& & 17,167& & & & \\ & & & \underset{–}{\overline{17,167}}& & & & \underset{–}{\overline{17,167}}\\ 2003& & & & 2003& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 34,500\\ & M1=8,500& & & & & & \\ & M2=\underset{–}{26,000}& & 34,500& & & & \\ & & & \underset{–}{\overline{34,500}}& & & & \underset{–}{\overline{34,500}}\\ 2004& & & & 2004& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 34,500\\ & M1=8,500& & & & & & \\ & M2=\underset{–}{26,000}& & 34,500& & & & \\ & & & \underset{–}{\overline{34,500}}& & & & \underset{–}{\overline{34,500}}\end{array}$

Working Note

Computation of Depreciation

Machine (i) or M1 = (56,000 + 24,000 + 5,000) @ $10\%$ = Rs 8,500

Machine (ii) or M2 = (2,50,000 + 10,000) @ $10\%$ = Rs 26,000

Depreciation for 2001 on Machine (i) will be charged for half year as it was purchased on 1st July ile., $\frac{8,500}{2}=Rs.4,250$

Depreciation on Machine (ii) will be charged in 2002 for 4 months only as it was purchased on 1st Sep = $[26,000\times \frac{4}{12}]=Rs.8,667$

Dr Machinery Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Jul 1}& \text{Bank A/c}& & & \text{Dec 31}& \text{Depreciation}& & \\ & & & & & \text{A/c}& & 4,250\\ & M1=56,000+& & & & & & \\ & 24,000+5,000& & 85,000& \text{Dec 31}& \text{Balance c/d}& & 80,750\\ & & & \underset{–}{\overline{85,000}}& & & & \underset{–}{\overline{85,000}}\\ 2002& & & & 2002& & & \\ \text{Jan 1}& \text{Balance b/d}& & & \text{Dec 31}& \text{Depreciation A/c}& & \\ & M1=(80,750)& & 80,750& & M1=8,075& & \\ \text{Sep 1}& \text{Bank A/c}& & & & M2=\underset{–}{8,667}& & 16,742\\ & M2=(2,50,000& & & & & & \\ & +10,000)& & 2,60,000& \text{Dec 31}& \text{Balance c/d}& & \\ & & & & & M1=72,675& & \\ & & & & & M2=\underset{–}{2,51,333}& & 3,24,008\\ & & & \underset{–}{\overline{3,40,750}}& & & & \underset{–}{\overline{3,40,750}}\\ 2003& & & & 2003& & & \\ \text{Jan 1}& \text{Balance b/d}& & & \text{Dec 31}& \text{Depreciation A/c}& & \\ & M1=72,675& & & & M1=7,268& & \\ & M2=\underset{–}{2,51,333}& & 3,24,008& & M2=\underset{–}{25,133}& & 32,401\\ & & & & \text{Dec 31}& \text{Balance c/d}& & 2,91,607\\ & & & & & & & \\ & & & \underset{–}{\overline{3,24,008}}& & & & \underset{–}{\overline{3,24,008}}\\ 2004& & & & 2004& & & \\ \text{Jan 1}& \text{Balance b/d}& & & \text{Dec 31}& \text{Depreciation A/c}& & \\ & M1=65,407& & & & M1=6,541& & \\ & M2=\underset{–}{2,26,200}& & 2,91,607& & M2=\underset{–}{22,620}& & 29,161\\ & & & & \text{Dec 31}& \text{Balance c/d}& & \\ & & & & & M1=58,866& & \\ & & & & & M2=\underset{–}{2,03,580}& & 2,62,446\\ & & & \underset{–}{\overline{2,91,607}}& & & & \underset{–}{\overline{2,91,607}}\end{array}$

Dr Depreciation Account Cr
$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt.(Rs)}\\ 2001& & & & 2001& & & \\ \text{Dec 31}& \text{Machinery A/c}& & 4,250& \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 4,250\\ & & & \underset{–}{\overline{42,50}}& & & & \underset{–}{\overline{42,50}}\\ 2002& & & & 2002& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 16,742\\ & M1=8,075& & & & & & \\ & M2=\underset{–}{8,667}& & 16,742& & & & \\ & & & \underset{–}{\overline{16,742}}& & & & \underset{–}{\overline{16,742}}\\ 2003& & & & 2003& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 32,401\\ & M1=7,268& & & & & & \\ & M2=\underset{–}{25,133}& & 32,401& & & & \\ & & & \underset{–}{\overline{32,401}}& & & & \underset{–}{\overline{32,401}}\\ 2004& & & & 2004& & & \\ \text{Dec 31}& \text{Machinery A/c}& & & \text{Dec 31}& \text{Profit}\&\text{Loss A/c}& & 29,161\\ & M1=6,541& & & & & & \\ & M2=\underset{–}{22,620}& & 29,161& & & & \\ & & & \underset{–}{\overline{29,161}}& & & & \underset{–}{\overline{29,161}}\end{array}$