Question

M/s J. P. Company, Sakri, purchased a motor lorry for Rs. 8,00,000 on 1st April, 2007. Company purchased a second-hand motor lorry for Rs. 3,60,000 on 1st October, 2008. The company charges depreciation @ 10% p.a. on original cost. The financial year of the company ends on 31st March every year. On 30th September 2009, the second-hand motor lorry was sold for Rs. 2,80,000. Prepare: Motor Lorry's Account for the years 2007-2008, 2008-2009 and 2009-2010 and Journal Entries for the year 2009-2010.

Answer 1

In the Books of J.P Company, Sakri
Motor Lorry Account
Dr.				Cr.
Date	Particulars		Amount (Rs)	Date	Particulars		Amount (Rs)
2007				2008
Apr. 01	Bank A/c (M1)		8,00,000	Mar. 31	Depreciation A/c		80,000
				Mar. 31	Balance c/d		7,20,000
			8,00,000				8,00,000
2008				2009
Apr.  01	Balance b/d		7,20,000	Mar. 31	Depreciation A/c
Oct. 01	Bank A/c (M2)		3,60,000		M1	80,000
					M2	18,000	98,000
				Mar. 31	Balance c/d
					M1	6,40,000
					M2	3,42,000	9,82,000
			10,80,000				10,80,000
2009				2009
Apr. 01	Balance b/d			Sept. 30	Depreciation A/c (on M2)		18,000
	M1	6,40,000			Bank A/c (Sale of M2)		2,80,000
	M2	3,42,000	9,82,000		Profit and Loss A/c (Loss on Sale)		44,000
				2010
				Mar. 31	Depreciation A/c (M1)		80,000
					Balance c/d		5,60,000
			9,82,000				9,82,000

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2009
Sept. 30	Depreciation A/c	Dr.		18,000
	To Motor Lorry A/c				18,000
	(Depreciation charged on motor lorry sold)
	Bank A/c	Dr.		2,80,000
	To Motor Lorry A/c				2,80,000
	(Motor lorry sold)
	Profit & Loss A/c	Dr.		44,000
	To Motor Lorry A/c				44,000
	(Loss made on sale on motor lorry)
2010
Mar. 31	Depreciation A/c	Dr.		80,000
	To Motor Lorry A/c				80,000
	(Depreciation charged)

Working Notes:
WN1 Calculation of Profit or Loss on Sale

Particulars	Amount
Value of M2 as on Apr. 01, 2009	3,42,000
Less: Depreciation for 6 months	18,000
Value of M2 as on Sept. 30, 2009	3,24,000
Less: Sale Value	2,80,000
Loss on Sale	44,000

WN2 Calculation of Depreciation

\[\begin{array}{l}On M1 \\ \text{For the year}\ 2007-08, 2008-09 \text{and} 2009-10 = 8,00,000 \times\frac{10}{100}= Rs 80,000 \\ On M2 \\ \text{For}\ 2008-09 (Oct 08 - Mar 31) = 3, 60, 000 \times\frac{10}{100} \times \frac{6}{12}= Rs 18,000 \\ \text{For}\ 2009-10 (Apr 01 - Sept 30) = 3, 60, 000 \times\frac{10}{100} \times \frac{6}{12}= Rs 18,000\end{array}\]