Question : Saraswati Ltd purchased a machinery costing Rs $10, 00, 000$ on January 1, 2001. A new machinery was purchased on 01, May, 2002 for Rs $15, 00, 000$ and another on July 1, 2004 for Rs $12, 00, 000$ . A part of the machinery which originally cost Rs $2, 00, 000$ in 2001 was sold for Rs. $75, 000$ on October 31, 2004. Show the Machinery account, Provision for depreciation account and Machinery disposal account for 2001 to 2005. If depreciation is provided at $10 %$ per annum on original cost and account are closed on December 31st, every year.

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Solution

Answer :
Dr Machinery Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2001 Jan 1 To Bank A/c M1 $(8,00,000 + 2,00,000) $10, 00, 000$ 2001 Dec 31 By Balance c/d $10, 00, 000$
$10, 00, 000$ $10, 00, 000$
2002 Jan 1 To Balance b/d (M1) $10, 00, 000$ 2002 Dec 31 By Balance c/d $25, 00, 000$
May 1 To Bank A/c (M2) $15, 00, 000$
$25, 00, 000$ $25, 00, 000$
2003 Jan 1 To Balance b/d $25, 00, 000$ 2003 Dec 31 By Balance c/d $25, 00, 000$
$25, 00, 000$ $25, 00, 000$
2004 Jan 1 To Balance b/d $25, 00, 000$ 2004 Oct 31 By Machinery Disposal A/c $2, 00, 000$
Jul 1 To Bank A/c (M3) $12, 00, 000$ Dec 31 By Balance c/d
M1 = $(10, 00, 000 - 2, 00, 000)$
M2 = $15, 00, 000$
M3 = $12, 00, 000$

$35, 00, 000$
$37, 00, 000$ $37, 00, 000$
2005 Jan 1 To Balance b/d
M1 = $8, 00, 000$
M2 = $15, 00, 000$
M3 = $12, 00, 000$
$35, 00, 000$ 2005 Dec 31 By Balance c/d
M1 = $8, 00, 000$
M2 = $15, 00, 000$
M3 = $12, 00, 000$
$35, 00, 000$
$35, 00, 000$ $35, 00, 000$
Dr Provision for Depreciation Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2001 Dec 31 To Balance c/d $1, 00, 000$ 2001 Dec 31 By Depreciation A/c $1, 00, 000$
$1, 00, 000$ $1, 00, 000$
2002 Dec 31 To Balance c/d $3, 00, 000$ 2002 Jan 1 By Balance b/d $1, 00, 000$
Dec 31 By Depreciation A/c M1 = $1, 00, 000$
M2 = $1, 00, 000$
(Dep on M2 is for 8 months)
$2, 00, 000$
$3, 00, 000$ $3, 00, 000$

Date Particulars JF Amt. (Rs) Date Particulars JF Amt.(Rs)
2003 Dec 31 To Balance b/d $5, 50, 000$ 2003 Jan 1 By Balance b/d $3, 00, 000$
Dec 31 By Depreciation A/c
M1= $1, 00, 000$
M2= $1, 50, 000$
$2, 50, 000$
$5, 50, 000$ $5, 50, 000$
2004 Jan 31 To Machinery Disposal A/c $76, 667$ 2004 Jan 1 By Balance b/d $5, 50, 000$
Dec 31 To Balance c/d $7, 80, 000$ Oct 31 By Depreciation A/c $16, 667$
By Depreciation A/c
M1 = $8, 00, 000$
M2 = $1, 50, 000$
M3 = $60, 000$
$2, 90, 000$
$8, 56, 667$ $8, 56, 667$
2005 Dec 31 To Balance c/d $11, 30, 000$ 2005 Jan1 By Balance b/d $7, 80, 000$
Dec 31 By Depreciation A/c
M1 = $80, 000$
M2 = $1, 50, 000$
M3 = $1, 20, 000$
$3, 50, 000$
$11, 30, 000$ $11, 30, 000$

Dr Machinery Disposal Account Cr
Date Particulars JF Amt.(Rs) Date Particulars JF Amt.(Rs)
2004 Oct 31 To Machinery A/c $2, 00, 000$ 2004 Oct 31 By Depreciation A/c $76, 667$
Oct 31 By Bank A/c (Sales Proceed) $75, 000$
Oct 31 By Profit & Loss A/c (Loss on Sale) $48, 333$
$2, 00, 000$ $2, 00, 000$

Working Note
Computation of Profit or Loss on Disposal
Total Dep charged on Machine till Oct 1,2004
(2001) $20, 000$ + (2002) $20, 000$ + (2003) $20, 000$ + (2004 Oct) + $16, 667$ = $R s .76, 667$
Value of Machine on Oct 1, 2004 = $2, 00, 000$ - $76, 667$ = $R s . 1, 23, 333$
Loss on Sale of Machine = $[1, 23, 333 - 75, 000] = R s .48, 333$ (Loss)

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Similar questions

Saraswati Ltd purchased a machinery costing Rs 10,00,000 on January 1, 2001. A new machinery was purchased on 01, May 2002 for Rs 15,00,000 and another on July 1, 2004, for Rs 12,00,000. A part of the machinery which originally cost Rs 2,00,000 in 2001 was sold for Rs 75,000 on October 31, 2004. Show the Machinery account, Provision for depreciation account and Machinery disposal account for 2001 to 2005. If depreciation is provided at $10 %$ per annum on original cost and account are closed on December 31st, every year.

Ganga Ltd purchased a machinery on January 1, 2001, for Rs 5,50,000 and spent Rs 50,000 on its installation. On September 1, 2001, it purchased another machine for Rs 3,70,000. On May 01, 2002 it purchased another machine for Rs 8,40,000 (including installation expenses).

Depreciation was provided on machinery @ $10 %$ per annum on original cost method annually on December 31. Prepare

(a) Machinery account and Depreciation account for the years 2001, 2002, 2003 and 2004.

(b) If depreciation is accumulated in the provision for Depreciation account, then prepare Machine account and Provision for depreciation account for the years 2001, 2002, 2003 and 2004.

Q. Question: The following balances appear in the books of Crystal Ltd on January 1, 2005

Items	(Rs)
Machinery account on	$15, 00, 000$
Provision for depreciation account	$5, 50, 000$

On April 1, 2005, a machinery which was purchased on January 1, 2002 for Rs

2, 00, 000

was sold for Rs

75, 000

. A new machine was purchased on July 1, 2005, for Rs

6, 00, 000

. Depreciation is provided on machinery at

20 %

per annum on straight-line method and books are closed on December 31st every year. Prepare the Machinery account and Provision for depreciation account for the year ending December 31, 2005.

Q. Question :

Berlia Ltd purchased a second hand machine for Rs

56, 000

on July 1, 2001 and spent Rs

24, 000

on its repair and installation and Rs

5, 000

for its carriage. On September 1, 2002,it purchased another machine for Rs

2, 50, 000

and spent RS

10, 000

on its installation.

(a) Depreciation is provided on machinery @

10 %

per annum on original cost method annually on December 31. Prepare Machinery account and Depreciation account from the year 2001 to 2004.
(b) Prepare Machinery account and Depreciation account from the year 2001 to 2004. If depreciation is provided on machinery annually on December 31.

The following balances appear in the books of Crystal Ltd on January 1, 2005

$\begin{matrix} Items & (R s) Machinery account on & 15, 00, 000 Provision for depreciation account & 5, 50, 000 \end{matrix}$

On April 1, 2005, a machinery which was purchased on January 1, 2002 for Rs 2,00,000 was sold for Rs 75,000. A new machine was purchased on July 1, 2005 for Rs 6,00,000. Depreciation is provided on machinery at $20 %$ per annum on straight line method and books are closed on December 31st every year. Prepare the Machinery account and Provision for depreciation account for the year ending December 31, 2005.

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Date	Particulars	JF	Amt.(Rs)	Date	Particulars	JF	Amt.(Rs)
2001 Jan 1	To Bank A/c M1 $(8,00,000 + 2,00,000)		$10, 00, 000$	2001 Dec 31	By Balance c/d		$10, 00, 000$
			$10, 00, 000$				$10, 00, 000$
2002 Jan 1	To Balance b/d (M1)		$10, 00, 000$	2002 Dec 31	By Balance c/d		$25, 00, 000$
May 1	To Bank A/c (M2)		$15, 00, 000$
			$25, 00, 000$				$25, 00, 000$
2003 Jan 1	To Balance b/d		$25, 00, 000$	2003 Dec 31	By Balance c/d		$25, 00, 000$
			$25, 00, 000$				$25, 00, 000$
2004 Jan 1	To Balance b/d		$25, 00, 000$	2004 Oct 31	By Machinery Disposal A/c		$2, 00, 000$
Jul 1	To Bank A/c (M3)		$12, 00, 000$	Dec 31	By Balance c/d M1 = $(10, 00, 000 - 2, 00, 000)$ M2 = $15, 00, 000$ M3 = $12, 00, 000$		$35, 00, 000$
			$37, 00, 000$				$37, 00, 000$
2005 Jan 1	To Balance b/d M1 = $8, 00, 000$ M2 = $15, 00, 000$ M3 = $12, 00, 000$		$35, 00, 000$	2005 Dec 31	By Balance c/d M1 = $8, 00, 000$ M2 = $15, 00, 000$ M3 = $12, 00, 000$		$35, 00, 000$

Date	Particulars	JF	Amt. (Rs)	Date	Particulars	JF	Amt.(Rs)
2003 Dec 31	To Balance b/d		$5, 50, 000$	2003 Jan 1	By Balance b/d		$3, 00, 000$
				Dec 31	By Depreciation A/c M1= $1, 00, 000$ M2= $1, 50, 000$		$2, 50, 000$
			$5, 50, 000$				$5, 50, 000$
2004 Jan 31	To Machinery Disposal A/c		$76, 667$	2004 Jan 1	By Balance b/d		$5, 50, 000$
Dec 31	To Balance c/d		$7, 80, 000$	Oct 31	By Depreciation A/c		$16, 667$
					By Depreciation A/c M1 = $8, 00, 000$ M2 = $1, 50, 000$ M3 = $60, 000$		$2, 90, 000$
			$8, 56, 667$				$8, 56, 667$
2005 Dec 31	To Balance c/d		$11, 30, 000$	2005 Jan1	By Balance b/d		$7, 80, 000$
				Dec 31	By Depreciation A/c M1 = $80, 000$ M2 = $1, 50, 000$ M3 = $1, 20, 000$		$3, 50, 000$
			$11, 30, 000$				$11, 30, 000$