Question

Saraswati Ltd. purchased a machinery costing Rs 10,00,000 on January 01, 2011. A new machinery was purchased on 01 May, 2012 for Rs 15,00,000 and another on July 01, 2014 for Rs 12,00,000. A part of the machinery which originally cost Rs 2,00,000 in 2011 was sold for Rs 75,000 on October 31, 2014. Show the machinery account, provision for depreciation account and machinery disposal account from 2011 to 2015 if depreciation is provided at 10% p.a. on original cost and account are closed on December 31, every year.

Answer 1

Books of Saraswati Ltd. Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Jan.01	Bank (i)		10,00,000
	(8,00,000 + 2,00,000)			Dec.31	Balance c/d		10,00,000
			10,00,000				10,00,000
2012				2012
Jan.01	Balance b/d		10,00,000	Dec.31	Balance c/d		25,00,000
May.01	Bank (ii)		15,00,000
			25,00,000				25,00,000
2013				2013
Jan.01	Balance b/d		25,00,000	Dec.31	Balance c/d		25,00,000
			25,00,000				25,00,000
2014				2014
Jan.01	Balance b/d		25,00,000	Oct.31	Machinery Disposal		2,00,000
Jul.01	Bank (ii)		12,00,000	Dec.31	Balance c/d
					(i) 8,00,000 (ii) 15,00,000
					(iii) 12,00,000		35,00,000
			37,00,000				37,00,000
2015				2015
Jan.01	Balance c/d		35,00,000	Dec.31	Balance c/d		35,00,000
			35,00,000				35,00,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Dec.31	Balance c/d		1,00,000
				Dec.31	Depreciation (i)		1,00,000
			1,00,000				1,00,000
2012				2012
Dec.31	Balance c/d		3,00,000	Jan.01	Balance c/d		1,00,000
				Dec.31	Depreciation
					(i) 1,00,000 (ii) 1,00,000		2,00,000
					(8 months)
			3,00,000				3,00,000
2013				2013
Dec.31	Balance b/d		5,50,000	Jan.01	Balance c/d		3,00,000
				Dec.31	Depreciation		2,50,000
			5,50,000		(i) 1,00,000 (ii) 1,50,000,		5,50,000
2014				2014
Oct.31	Machinery Disposal		76,667	Jan.01	Balance b/d		5,50,000
Dec.31	Balance c/d		7,80,000	Oct.31	Depreciation		16,667
				Dec.31	Depreciation
					(i) 80,000, (ii) 1,50,000,
					(iii) 60,000		2,90,000
			8,56,667				8,56,667
2015				2015
Dec.31	Balance c/d		11,30,000	Jan.01	Balance c/d		7,80,000
				Dec.31	Depreciation
					(i) 80,000, (ii) 1,50,000,
					(iii) 1,20,000		3,50,000
			11,30,000				11,30,000

Machinery Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2014
Oct.31	Machinery		2,00,000	Oct.31	Depreciation		76,667
				Oct.31	Bank		75,000
				Oct.31	Profit and Loss (Loss)		48,333
			2,00,000				2,00,000

Working Note:

	Opening Balance		Depreciation		Closing Balance
2011	2,00,000	–	20,000	=	1,80,000
2012	1,80,000	–	20,000	=	1,60,000
2013	1,60,000	–	20,000	=	1,40,000
2014	1,40,000	–	16,667	=	1,23,333
	Accumulated Depreciation		76,667

Value on Oct. 01, 2004	1,23,333
Sale on Oct. 01, 2004	– 75,000
Loss on sale	Rs 48,333

Note: As per the solution, the balance of Machinery Disposal Account transferred to Profit and Loss Account is Rs 48,333; however, as per the book the answer is Rs 58,333.