Question

On 1st April, 2012 Manas Ltd purchased 10 machines of Rs.30,000 each. On 30th June, 2013. 1 machine out of the 10 machines purchased on 1st April, 2012 was sold for Rs. 24,000 and on 31st December, 2014 one more machine was sold for Rs.22,500. A new machine was purchased on 30th September, 2015 for Rs.32,000. The company has adopted the practice of providing depreciation at 10 % per annum on original cost of machine. The company closes its books on 31st March, every year. You are required to prepare machinery account upto 31st March, 2016.

Answer 1

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

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ \text{2012}& & & & \text{2013}& & & \\ \text{Apr 1}& \text{Bank A/c}& & 3,00,000& \text{Mar 31}& \text{Depreciation A/c}& & 30,000\\ & (Rs.30,000\times 10)& & & & (3,00,000\times 10\%)& & \\ & & & & \text{Mar 31}& \text{Balance c/d}& & 2,70,000\\ & & & \overline{\underset{–}{3,00,000}}& & & & \overline{\underset{–}{3,00,000}}\\ \text{2013}& & & & \text{2013}& & & \\ \text{Apr 1}& \text{Balance b/d}& & 2,70,000& \text{Jun 30}& \text{Depreciation A/c}& & \\ & & & & & (30,000\times \frac{10}{100}\times \frac{3}{12})& & 750\\ & & & & \text{Jun 30}& \text{Bank A/c}& & 24,000\\ & & & & \text{Jun 30}& \text{Profit and Loss A/c}& & 2,250\\ & & & & & \text{(WN1)}& & \\ & & & & \text{2014}& & & \\ & & & & \text{Mar 31}& \text{Depreciation A/c}& & \\ & & & & & (2,70,000\times 10\%)& & 27,000\\ & & & & & \text{Balance c/d}& & 2,16,000\\ & & & \overline{\underset{–}{2,70,000}}& & & & \overline{\underset{–}{2,70,000}}\\ \text{2014}& & & & \text{2014}& & & \\ \text{Apr 1}& \text{Balance b/d}& & 2,16,000& \text{Dec 31}& \text{Depreciation A/c}& & 2,250\\ \text{Dec 31}& \text{Profit and Loss A/c}& & 750& & (30,000\times \frac{10}{100}\times \frac{9}{12})& & \\ & \text{(WN 2)}& & & & & & \\ & & & & \text{Dec 31}& \text{Bank A/c}& & 22,500\\ & & & & 2015& & & \\ & & & & \text{Mar 31}& \text{Depreciation A/c}& & 24,000\\ & & & & & (Rs.2,40,000\times 10\%)& & \\ & & & & \text{Mar 31}& \text{Balance c/d}& & 1,68,000\\ & & & \overline{\underset{–}{\underset{–}{2,16,750}}}& & & & \overline{\underset{–}{\underset{–}{2,16,750}}}\\ \text{2015}& & & & \text{2016}& & & \\ \text{Apr 1}& \text{Balance b/d}& & 1,68,000& \text{Mar 31}& \text{Depreciation A/c (WN3)}& & 25,600\\ \text{Sep 30}& \text{Bank A/c}& & 32,000& \text{Mar 31}& \text{Balance c/d}& & 1,74,400\\ & & & \overline{\underset{–}{\underset{–}{2,00,000}}}& & & & \overline{\underset{–}{\underset{–}{2,00,000}}}\end{array}$

Working Note

(i) Calculation of Gain or Loss on Sale on 30 th June, 2012

$\begin{array}{ccc}\text{Original cost of machine sold}& & 30,000\\ \text{(-) Depreciation provided upto date of sale}& & \\ \text{On 31st March, 2013 (On Rs 30,000 @ 10\% for 1 year)}& 3,000& \\ \text{On 30th June, 2013 (On Rs 30,000 @ 10\% for 3 months)}& \underset{–}{750}& \underset{–}{(3,750)}\\ \text{Book value on date of sale}& & 26,250\\ \text{(-) Selling price}& & \underset{–}{(24,000)}\\ \text{(Profit)/Loss on sale}& & \underset{–}{\underset{–}{\text{Rs.}2,250}}\end{array}$

(ii) Calculation of Gain or Loss on Sale on 31st December, 2014
$\begin{array}{ccc}\text{Original cost of machine sold}& & 30,000\\ \text{(-) Depreciation provided upto date of sale}& & \\ \text{On 31st March, 2013 (On Rs 30,000@ 10 \% for 1 year)}& 3,000& \\ \text{On 31st March, 2014 (On Rs 30,000 @ 10 \% for 1 year)}& 3,000& \\ \text{On 31st December, 2014 (On Rs 30,000 @ 10 \% for 9 months)}& \underset{–}{2,250}& \underset{–}{(8,250)}\\ \text{Book value on date of sale}& & 21,750\\ \text{(-) Selling price}& & \underset{–}{(22,500)}\\ \text{(Profit)/Loss on sale}& & \underset{–}{\underset{–}{\text{Rs.}\left(750\right)}}\end{array}$

(iii) Depreciation Provided on 31st March, 2016

$\begin{array}{ccc}\text{On Rs. 2,40,000 @ 10\% for 1 year}& & 24,000\\ \text{On Rs. 32,000 @ 10\%for 6 months}& & 1,600\\ \text{Profit on sale}& & \underset{–}{\underset{–}{\text{Rs.}\overline{25,600}}}\end{array}$