Question

Following balances appear in the books of Rama Bros:

		₹
1st April, 2016	Machinery A/c	80,000
	Provision for Depreciation A/c	36,000

On 1st April, 2016, they decided to sell a machine for ₹ 8,700. This machine was purchased for ₹ 16,000 in April, 2012. Prepare the Provision for Depreciation Account and Machinery Account on 31st March, 2017, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line Method.

Answer 1

Books of Rama Bros. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2016					2016
Apr.01		Balance b/d (64,000 + 16,000)		80,000	Apr.01	Provision for Depreciation		6,400
					Apr.01	Bank		8,700
					Apr.01	Profit and Loss		900
					2017
					Mar.31	Balance c/d		64,000
				80,000				80,000

Provision for Depreciation Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2016					2016
Apr.01		Machinery Account (Accumulated Dep. on Machine Sold)		6,400	Apr.01	Balance b/d		36,000
2017 Mar.31		Balance c/d		36,000	2017 Mar.31	Depreciation (on 64,000 @10%)		6,400
				42,400				42,400

Working Notes

(1) Calculation of Book Value of Machine Sold on April 01, 2015

Particulars	Amount (₹)
Machine purchased in 2012	16,000
Less: Accumulate Depreciation for 4 years till Mar 31, 2015 (1,600 × 4)	(6,400)
Book value on April 01, 2016	9,600

(2)Calculation of profit or loss on Sale of Machine

Particulars	Amount (₹)
Book Value on April 01, 2016	9,600
Less: Sale Value	(8,700)
Loss on Sale of Machine	900