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Question

Following balances appear in the books of Priyank Brothers:
1st April, 2017 Machinery A/c 20,00,000
Provision for Depreciation A/c 8,00,000

On 1st April, 2017, they decide to sell a machine for ₹ 5,00,000. This machine was purchased for ₹ 7,50,000 on 1st April, 2014. Prepare the Machinery Account and Provision for Depreciation Account for the year ended 31st March, 2018 assuming that the firm has been charging Depreciation @ 10% p.a. on the Straight Line Method.

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Solution

Books of Priyank Brothers

Machinery Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

2017

April 01

Balance b/d

20,00,000

April 01

Provision for Depreciation

2,25,000

April 01

Bank

5,00,000

April 01

Profit and Loss (Loss)

25,000

2018

Mar.31

Balance c/d

12,50,000

20,00,000

20,00,000

Provision for Depreciation Account

Dr.

Cr.

Date

Particulars

J.F.

Amount

()

Date

Particulars

J.F.

Amount

()

2017

2017

April 01

Machinery

2,25,000

April 01

Balance b/d

8,00,000

2018

2018

Mar.31

Balance c/d

7,00,000

Mar.31

Depreciation (for the year)

1,25,000

9,25,000

9,25,000

Working Notes

1 Calculation of Loss on Sale of Machinery

Particulars

Amount

()

Original cost of Machine Sold

7,50,000

Less: Accumulated Depreciation on Machine Sold, for 3 years, (7,50,000 × 10% × 3 years)

(2,25,000)

Book Value of Machine Sold

5,25,000

Less: Sale Value

(5,00,000)

Loss on Sale of Machine

25,000


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