Question

​​On 1st April, 2016, X Ltd. purchased a machine costing ₹ 4,00,000 and spent ₹ 50,000 on its installation. The estimated life of the machinery is 10 years, after which its residual value will be ₹ 50,000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare Machinery Account for the first three years. The books are closed on 31st March every year.

Answer 1

Book of X Ltd. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2016					2017
April 01		Bank		4,00,000	Mar.31	Depreciation		40,000
April 01		Bank (Erection Expense)		50,000		Balance c/d		4,10,000
				4,50,000				4,50,000
2017					2018
April 01		Balance b/d		4,10,000	Mar.31	Depreciation		40,000
						Balance c/d		3,70,000
				4,10,000				4,10,000
2018					2019
April 01		Balance b/d		3,70,000	Mar.31	Depreciation		40,000
						Balance c/d		3,30,000
				3,70,000				3,70,000

Calculation of Depreciation:

$$\begin{gathered} \mathrm{Depreciation}\mathrm{p}.\mathrm{a}.=\frac{4,00,000+50,000-50,000(\mathrm{Scrap}\mathrm{Value})}{10\mathrm{years}} \\ =₹40,000\mathrm{p}.\mathrm{a}. \end{gathered}$$