Question

Radhika-Masale’ Amravati purchased a Plant on 1st Jan. 2015 for ₹ 80,000. A new Plant was also purchased
for ₹ 60,000, installation expenses being ₹ 10,000 on 1st April 2016. On 1st Jan 2017, a new Plant was purchased for ₹ 20,000, by disposing of the 1st Plant at ₹ 60,000.
Prepare Plant Account and Depreciation Account for 31st March 2015, 31st March 2016, and 31st March 2017, assuming that the rate of depreciation was @ 10% on Diminishing Balance Method.
Solution:

Answer 1

In the books of Radhika-Masale, Amravati

Dr.	Plant Account						Cr.
Date	Particulars	J.F.	Amt ₹	Date	Particulars	J.F.	Amt ₹
2015				2015
Jan. 1	To Cash/Bank A/c		80,000	Mar. 31	By Depreciation A/c		2,000
				Mar. 31	By Balance c/d		78,000
			80,000				80,000
2015				2016
Apr. 1	To Balance b/d		78,000	Mar. 31	By Depreciation A/c		7,800
				Mar. 31	By Balance c/d		70,200
			78,000				78,000
2016				2017
Apr. 1	To Balance b/d		70,200	Jan. 1	By Cash/Bank A/c		60,000
Apr. 1	To Cash/Bank A/c		70,000	Jan. 1	By Depreciation A/c		5,265
	(60,000 + 10,000)			Jan. 1	By P/L A/c (loss on sale)		4,935
2017				Mar. 31	By Depreciation A/c		7,500
Jan. 1	To Cash/Bank A/c		20,000	Mar 31	By Balance c/d		82,500
			1,60,200				1,60,200
2017
Apr. 1	To Balance b/d		82,500

 

Dr.	Depreciation Account						Cr.
Date	Particulars	J.F.	Amt ₹	Date	Particulars	J.F.	Amt ₹
2015				2015
Mar. 31	To Plant A/c		2,000	Mar. 31	By Profit and Loss A/c		2,000
			2,000				2,000
2016				2016
Mar. 31	To Plant A/c		7,800	Mar. 31	By Profit and Loss A/c		7,800
			7,800				7,800
2017				2017
Jan. 1	To Plant A/c		5,265	Mar. 31	By Profit and Loss A/c		12,765
Mar. 31	To Plant A/c		7,500
			12,765				12,765

Working Notes:

1. Calculation of Profit or loss on sale of plant:

Original cost on 01.01.2015 = ₹ 80,000

Less: Depreciation for 2014.15. (3 months) = ₹ 2,000

W.D.V. on 01.04.2015 = ₹ 78,000

Less: Depreciation for 2015 -16 (12 months) = ₹ 7,800

W.D.V. on 01.04.2016 = ₹ 70,200

Less: Depreciation for 2016 -17 (9 months) = ₹ 5,265

W.D.V. on date of sale = ₹ 64,935

Less: Selling price = ₹ 60,000

∴ Loss on sale of plant = ₹ 4,935

2. Calculation of Depreciation for 2016-17:

(a) Opening balance on 01.04.2016 = ₹ 70,200

Less: W.D.V. of plant sold on 01.04.2016 = ₹ 70,200 Nil – 10% = Nil

(b) Purchase of plant on 01.04.2016 – 10% – 12months = ₹ 7,000

(c) Purchase of plant on 01.01.2017 – 10% – 3m months = ₹ 500

Total = ₹ 7,500