Question

Vishal Company, Dhule, purchased Machinery costing ₹ 60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹ 30,000, and on 1st July 2018, costing ₹ 20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹ 18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for the Third year, after charging depreciation at 10% p.a. on Written Down Value Method.

Answer 1

In the books of Vishal Company, Dhule
Dr.	Printing Machinery Account						Cr.
Date	Particulars	J.F.	Amt (₹)	Date	Particulars	J.F.	Credit (₹)
2016				2017
Apr.1	To Cash/Bank A/c		60,000	Mar.31	By Depreciation A/c		6,000
				Mar.31	By Balance c/d		54,000
			60,000				60,000
2017				2018
Apr.1	To Balance b/d		54,000	Mar.31	By Depreciation A/c 5,400 + 1,500)		6,900
Oct.1	To Cash/Bank A/c		30,000	Mar.31	By Balance c/d		77,100
			84,000				84,000
2018				2019
Apr.1	To Balance b/d		77,100	Jan.1	By Cash/Bank A/c		18,000
July. 1	To Cash/Bank A/c		20,000	Jan.1	By Depreciation A/c		1,215
2019				Mar.31	By Depreciation A/c		7,590
Jan.1	To Profit and Loss A/c		3,015	Mar.31	By Balance c/d		73,310
	(Profit on sale)
			1,00,115				1,00,115
2019
Apr.1	To Balance b/d		73,310

 

Journal of Vishal Company
Date	Particulars	L.F.	Debit (₹)	Credit ₹
2018 July 1	Machinery A/c      ...Dr.		20,000
	To Cash/Bank A/c			20,000
	(Being purchase of machinery)
2019 Jan. 1	To Cash/Bank A/c    ...Dr.		18,000
	Machinery A/c			18,000
	(Being Sale machinery)
Jan. 1	Depreciation A/c     ...Dr.		1,215
	To Machinery A/c			1,215
	(Being depreciation charged on machinery sold)
Jan. 1	Machinery A/c     ...Dr.		3,015
	To Profit and Loss A/c			3,015
	(Being profit on sale on machinery)
Mar. 31	Depreciation A/c    ...Dr.		7,590
	To Machinery A/c			7,590
	(Being in Depreciation charged at the end of the year)
Mar. 31	Profit and Loss A/c     ...Dr.		8,805
	To Depreciation A/c			8,805
	(Being balance in Depreciation A/c transferred to P& L A/c)
	Total (₹)		58,625	58,625

Working Notes:

1. Calculation of Profit or Loss on sale as Machine:

Original cost on 01.04.2016 = ₹ 20,000

Less: Dep. for 2016-17 (12 months) = ₹ 2,000

W.D.V. on 01.04.2017 = ₹ 18,000

Less : Dep. for 2016-17 (12 months) = ₹ 1,800

W.D.V. on 01.04.2018 = ₹ 16,200

Less : Dep. for 2018-19 (9 months) = ₹ 1,215

W.D.V. on date of sale = ₹ 14,985

Less : Selling Price = ₹ 18,000

∴ Profit on sale & machine = ₹ 3,015

2. Depreciation for 2018-19

(a) Opening balance on 01.04.2018 = ₹ 77,100

Less : W.D.V. of Machine sold on 01.04.2018 = ₹ 16,200

10% depreciation on 60,900 = ₹ 6,090

(b) Purchase of Machine on 01.07.2018 20,000 – 10% – 9 months = ₹ 6,090 + ₹ 1,500 = ₹ 7,590