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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.


Solution

Answer (a) 

Dr                                      Machinery Account                              Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)20012001Jul 1Bank A/cDec 31Depreciation A/c4,250Machine (i)85,000[56,000]24,000+5,000]Dec 31 Balance c/d80,750¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯85,500––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯85,500––––––20022002Jan 1Balance b/d80,750Dec 31Depreciation A/cMachine (i)Machine (i)  8,500Sep 1Bank A/cMachine (ii) 8,667–––––17,167Machine (ii)(2,50,000+10,000)2,60,0002002Dec 31Balance c/dMachine (i)      72,250Machine (ii) 2,51,333–––––––––3,23,583¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,40,750––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,40,750––––––––20032003Jan 1Balance b/dDec 31Depreciation A/cMachine (i)    72,250Machine (i)    8,500Machine (ii) 2,51,333–––––––––3,23,583Machine (ii) 26,000––––––34,500Dec 31Balance c/dMachine (i)      63,750Machine (ii) 2,25,333––––––––2,89,083¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,23,583––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,23,583––––––––20042004Jan 1Balance b/dDec 31Depreciation A/cMachine (i)    63,750Machine (i)    8,500Machine (ii) 2,25,333––––––––2,89,083Machine (ii) 26,000––––––34,500Balance c/dMachine (i)      55,250Machine (ii) 1,99,333––––––––2,54,583¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,89,083––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,89,083––––––––

Dr                                              Depreciation Account                  Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)2001Machinery A/c4,2502001Dec 31Dec 31Profit & Loss A/c4,250¯¯¯¯¯¯¯¯¯¯¯¯¯4,250––––¯¯¯¯¯¯¯¯¯¯¯¯¯4,250––––20022002Dec 31Machinery A/cDec 31Profit & Loss A/c17,167           M1=8,500           M2=8,667––––17,167¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯17,167––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯17,167––––––20032003Dec 31Machinery A/cDec 31Profit & Loss A/c34,500           M1=  8,500           M2=26,000––––––34,500¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯34,500––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯34,500––––––20042004Dec 31Machinery A/cDec 31Profit & Loss A/c34,500           M1=  8,500           M2=26,000––––––34,500¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯34,500––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯34,500––––––

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., 8,5002=Rs.4,250

Depreciation on Machine (ii) will be charged in 2002 for 4 months only as it was purchased on 1st Sep = [26,000×412]=Rs.8,667

Dr                                                             Machinery Account                                                                         Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)20012001Jul 1Bank A/cDec 31DepreciationA/c4,250M1=56,000+24,000+5,00085,000Dec 31Balance c/d80,750¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯85,000––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯85,000––––––20022002Jan 1Balance b/dDec 31Depreciation A/cM1=(80,750)80,750          M1=8,075Sep 1Bank A/c          M2=8,667––––16,742M2=(2,50,000        +10,000)2,60,000Dec 31Balance c/d       M1=  72,675       M2=2,51,333––––––––3,24,008¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,40,750––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,40,750––––––––20032003Jan 1Balance b/dDec 31Depreciation A/cM1=   72,675         M1= 7,268M2=2,51,333––––––––3,24,008         M2=25,133––––––32,401Dec 31Balance c/d2,91,607¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,24,008––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯3,24,008––––––––20042004Jan 1Balance b/dDec 31Depreciation A/cM1=   65,407         M1= 6,541M2=2,26,200––––––––2,91,607         M2=22,620––––––29,161Dec 31Balance c/d      M1=   58,866      M2=2,03,580––––––––2,62,446¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,91,607––––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯2,91,607––––––––

Dr                                                                 Depreciation Account                                                                      Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)20012001Dec 31Machinery A/c4,250Dec 31Profit&Loss A/c4,250¯¯¯¯¯¯¯¯¯¯¯¯¯42,50––––¯¯¯¯¯¯¯¯¯¯¯¯¯42,50––––20022002Dec 31Machinery A/cDec 31Profit&Loss A/c16,742        M1=8,075        M2=8,667––––16,742¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯16,742––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯16,742––––––20032003Dec 31Machinery A/cDec 31Profit&Loss A/c32,401        M1=7,268        M2=25,133––––––32,401¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯32,401––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯32,401––––––20042004Dec 31Machinery A/cDec 31Profit&Loss A/c29,161      M1=  6,541      M2=22,620––––––29,161¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯29,161––––––¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯29,161––––––

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