Question

On 1st July, 2010, X Ltd. purchased a machinery for ₹ 15,00,000. Depreciation is provided @ 20% p.a. on the original cost of the machinery and books are closed on 31st March each year. On 31st May, 2012, a part of this machine purchased on 1st July 2010 for ₹ 3,60,000 was sold for ₹ 2,40,000 and on the same date new machinery was purchased for ₹ 4,20,000. You are required to prepare (a) Machinery Account, (b) Provision for Depreciation Account, and (c) Machinery Disposal Account.

Answer 1

Machinery Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars	Amount (Rs)
2010				2011
July 01	Bank A/c (11,40,000 + 3,60,000)	15,00,000		Mar. 31	Balance c/d	15,00,000
		15,00,000				15,00,000
2011				2012
Apr. 01	Balance b/d	15,00,000		Mar. 31	Balance c/d	15,00,000
		15,00,000				15,00,000
2012				2012
Apr. 01	Balance b/d	15,00,000		May 31	Machinery Disposal A/c	3,60,000
May 31	Bank A/c	4,20,000		2013
				Mar. 31	Balance c/d	15,60,000
		19,20,000				19,20,000

Machinery Disposal A/c
Dr.				Cr.
Date	Particulars	Amount (Rs)	Date		Particulars	Amount (Rs)
2012			2012
May 31	Machinery A/c	3,60,000	May 31		Provision for Depreciation A/c	1,38,000
May 31	Profit and Loss A/c (Profit on Sale)	18,000			Bank A/c (Sale)	2,40,000
		3,78,000				3,78,000

Provision for Depreciation Account
Dr.			Cr.
Date	Particulars	Amount (Rs)		Date	Particulars	Amount (Rs)
2011				2011
Mar. 31	Balance c/d	2,25,000		Mar. 31	Balance b/d (for 9 months)	2,25,000
		2,25,000				2,25,000
2012				2011
Mar. 31	Balance c/d	5,25,000		Apr. 01	Balance b/d	2,25,000
				2012
				Mar. 31	Depreciation A/c	3,00,000
		5,25,000				5,25,000
2012				2012
May 31	Machine Disposal A/c (54,000 + 72,000 + 12,000)	1,38,000		Apr. 01	Balance b/d	5,25,000
2013				May 31	Depreciation (for 2 months)	12,000
Mar. 31	Balance c/d	6,97,000		2013
				Mar. 31	Depreciation A/c (WN2)	2,98,000
		8,35,000				8,35,000

Working Notes:

WN1: Calculation of Profit & Loss on Sale

Particulars	Amount
Value of Machinery on July 01, 2010	3,60,000
Less: Depreciation for 9 months	54,000
Value of Machinery on Apr. 01, 2011	3,06,000
Less: Depreciation	72,000
Value of Machinery on Apr. 01, 2012	2,34,000
Less: Depreciation for 2 months	12,000
Value of Machinery on May 31, 2012	2,22,000
Less: Sale Value	2,40,000
Profit on Sale	18,000

WN2: Depreciation charged during the year

Particulars	Amount
On Rs 11,40,000 @ 20%	2,28,000
On Rs 4,20,000 @ 20% for 10 months	70,000
	2,98,000