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Question: Carriage Transport Company purchased 5 trucks at the cost of Rs 2,00,000 each on April 1, 2001. The company writes off depreciation @ 20% per annum on original cost and closes its books on December 31st, every year. On October 1, 2003, one of the trucks is involved in an accident and is completely destroyed. The insurance company has agreed to pay Rs 70,000 in full settlement of the claim. On the same date, the company purchased a second-hand truck for Rs 1,00,000 and spent Rs 20,000 on its overhauling. Prepare Truck account and Provision for depreciation account for the three years ended on December 31, 2003. Also, give Truck account if truck disposal account is prepared.

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Solution

Answer :
Dr Truck Account Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)
2001 Apr 1To Bank A/c 10,00,0002001 Dec 31By Balance c/d10,00,000
10,00,00010,00,000
2002 Jan 1To Balance b/d10,00,0002002 Dec 31By Balance c/d10,00,000
10,00,00010,00,000
2003 Jan 1 To Balance b/d (T1)10,00,0002003 Oct 1By Truck Disposal A/c20,00,000
Oct 1 To Bank A/c (T2)1,20,000Dec 31By Balance c/d9,20,000
11,20,00011,20,000

Dr Provision for Depreciation Account Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)
2001 Dec 31To Balance c/d1,50,0002001 Dec 31By Depreciation A/c1,50,000
1,50,0001,50,000
2002 Dec 31To Balance c/d3,50,0002002 Jan 1By Balance b/d1,50,000
Dec 31By Depreciation A/c2,00,000
3,50,0003,50,000
2003 Oct 1To Trunk Disposal A/c1,00,0002003 Jan 1By Balance b/d3,50,000
Dec 31To Balance c/d4,46,000Oct 31By Depreciation A/c (Dep till Oct 9 months)30,000
Dec 31By Depreciation A/c (Old)(T1) 1,60,000
(New)(T2) = 6,000
1,66,000
5,46,0005,46,000
Dr Truck Disposal Account Cr
DateParticularsJFAmt.(Rs)DateParticularsJFAmt.(Rs)
2003 Oct 1To Truck A/c2,00,0002003 Oct 1By Provision for Depreciation A/c1,00,000
Oct 1By Insurance Co (Claim Amount)70,000
Oct 1By Profit & Loss A/c (Loss on Sale)30,000
2,00,0002,00,000
Working Note
Total Depreciation Charged on Truck @ 20%
Dec 2001 = 30,000
Dec 2002 = 40,000
Oct 2003 = 30,000
Rs.1,00,000
Cost of truck at disposal = 2,00,0001,00,000=Rs.1,00,000
Profit or Loss on sales of truck
= 1,00,00070,000=Rs.30,000 (Loss)

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