Question

Madhukar Ltd. purchased a truck for Rs.7,50,000 on 1st July, 2014. Depreciation is charged on truck @ 15 % per annum on straight line method. On 1st October, 2016, the truck met with an accident. It was sold for Rs.2,00,000. Prepare truck account for three years assuming that the company closes its books on 31st December every year.

Answer 1

$\begin{array}{cccccccc}\text{Dr}& & & & \text{Truck Account}& & & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ 2014& & & & 2014& & & \\ \text{July 1}& \text{Bank A/c}& & 7,50,000& \text{Dec 31}& \text{Depreciation A/c (W.N)}& & 56,250\\ & & & & \text{Dec 31}& \text{Balance c/d}& & 6,93,750\\ & & & \overline{\underset{–}{\underset{–}{7,50,000}}}& & & & \overline{\underset{–}{\underset{–}{7,50,000}}}\\ 2015& & & & 2015& & & \\ \text{Jan 1}& \text{Balance b/d}& & 6,93,750& \text{Dec 31}& \text{Depreciation A/c}& & 1,12,500\\ & & & & \text{Dec 31}& \text{Balance c/d}& & 5,81,250\\ & & & \overline{\underset{–}{\underset{–}{6,93,750}}}& & & & \overline{\underset{–}{\underset{–}{6,93,750}}}\\ 2016& & & & 2016& & & \\ \text{Jan 1}& \text{Balance b/d}& & 5,81,250& \text{Oct 1}& \text{Bank A/c}& & 2,00,000\\ & & & & \text{Oct 1}& \text{Depreciation A/c}& & 84,375\\ & & & & & \text{(W.N 2)}& & \\ & & & & \text{Oct 1}& \text{Profit and Loss A/c}& & 2,96,875\\ & & & & & \text{(Loss on sale)}& & \\ & & & \overline{\underset{–}{\underset{–}{5,81,250}}}& & & & \overline{\underset{–}{\underset{–}{5,81,250}}}\end{array}$

Working Note:

W.N. 1

Depreciation on truck for the year 2014 will be calcuated for a period of 6 months, i.e. from 1st July to 31 December.

$\therefore$ Depreciation = 7,50,000 $\times \frac{15}{100}\times \frac{6}{12}$ = Rs. 56,250

W.N. 2

Depreciation on truck for the year 2016 will be calcuated for a period of 9 months, i.e. from 1st January to 30th September.

$\therefore$ Depreciation = 7,50,000 $\times \frac{15}{100}\times \frac{9}{12}$ = Rs. 84,375.

W.N. 3

$\begin{array}{cc}\text{Book value of truck on 1st January, 2016}& 5,81,250\\ \text{(-) Depreciation upto the date of sale}& \underset{–}{84,375}\\ \text{Book value of truck on the date of sale}& 4,96,875\\ \text{(-) Sale proceeds}& \underset{–}{2,00,000}\\ \therefore \text{Loss on sale of asset}& \underset{–}{2,96,875}\end{array}$