Advertisements
Advertisements
Question
Sameer & Company, Mumbai purchased a Machine worth ₹ 2,00,000 on 1st April 2016. On 1st July 2017, the company purchased an additional Machine for ₹ 40,000.
On 31st March 2019, the company sold the Machine purchased on 1st July 2017 for ₹ 35,000. The company writes off depreciation at the rate of 10% on the original cost and the books of accounts are closed every year on 31st March.
Show the Machinery Account and Depreciation Account for the first three years ending 31st March 2016-17, 2017-18 and 2018-19
Advertisements
Solution
In the books of Sameer & Company, Mumbai
| Dr. | Machinery Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2016 | 2017 | ||||||
| Apr. 1 | To Cash/Bank A/c | 2,00,000 | Mar. 31 | By Depreciation A/c | 20,000 | ||
| Mar. 31 | By Balance c/d | 1,80,000 | |||||
| 2,00,000 | 2,00,000 | ||||||
| 2017 | 2018 | ||||||
| Apr. 1 | To Balance b/d | 1,80,000 | Mar. 31 | By Depreciation A/c (20,000 + 3,000) | 23,000 | ||
| Jul. 1 | To Cash/Bank A/c | 40,000 | By Balance c/d | 1,97,000 | |||
| 2,20,000 | 2,20,000 | ||||||
| 2018 | 2019 | ||||||
| Apr. 1 | To Balance b/d | 1,97,000 | Mar. 31 | By Cash/Bank A/c | 35,000 | ||
| 2019 | Mar. 31 | By Depreciation A/c (4,000 + 20,000) |
24,000 | ||||
| Mar. 31 | To Profit and Loss A/c (Profit on sale) | 2,000 | Mar. 31 | By Balance c/d | 1,40,000 | ||
| 1,99,000 | 1,99,000 | ||||||
| 2019 | |||||||
| Apr. 1 | To Balance b/d | 1,40,000 | |||||
| Dr. | Depreciation Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2017 | 2017 | ||||||
| Mar. 31 | To Machinery A/c | 20,000 | Mar. 31 | By Profit and Loss A/c | 20,000 | ||
| 20,000 | 20,000 | ||||||
| 2018 | 2018 | ||||||
| Mar. 31 | To Machinery A/c | 23,000 | Mar. 31 | By Profit and Loss A/c | 23,000 | ||
| 23,000 | 23,000 | ||||||
| 2019 | 2019 | ||||||
| Mar. 1 | To Machinery A/c | 24,000 | Mar. 31 | By Profit and Loss A/c | 24,000 | ||
| 24,000 | 24,000 | ||||||
Working note:
Calculation of Profit or Loss on sale of machine:
Original cost on 01.07.2017 = ₹ 40,000
Less: Depreciation for 2017-18 (9 months) = ₹ 3,000
W.D.V. on 01-04-2018 = ₹ 37,000
Less: Depreciation for 2018-19 (12. months) = ₹ 4,000
W.D.V. on date of sale = ₹ 33,000
Less: Selling price = ₹ 35,000
∴ Profit on sale of machine = ₹ 2,000
APPEARS IN
RELATED QUESTIONS
Answer in One Sentence only:
What is a ‘Scrap Value’ of an asset?
Answer in One Sentence only:
Why depreciation is charged even in the year of loss?
Write the word/term/phrase which can substitute the following statement:
The period for which the asset remains in working condition.
Write the word/term/phrase which can substitute the following statement:
Expenses incurred for fixation of the new asset to bring it in working condition.
State whether the following statement is True or False with reasons:
The Profit or Loss on sale of fixed asset is ascertained only after charging depreciation.
Do you agree or disagree with the following statement:
The rate of depreciation depends upon the life of fixed asset.
Complete the following sentence:
Under ______ system, the amount of depreciation changes every year.
Complete the following sentence:
In Fixed Instalment System the amount of depreciation is ______ every year.
Under straight-line method, the amount of depreciation is ______.
List out the various methods of depreciation.
State the limitations of written down value method of depreciation.
An asset is purchased for ₹ 50,000. The rate of depreciation is 15% p.a. Calculate the annual depreciation for the first two years under the diminishing balance method.
Furniture costing ₹ 5,000 was purchased on 1.1.2016, the installation charges being ₹ 1,000. The furniture is to be depreciated @ 10% p.a. on the diminishing balance method. Pass journal entries for the first two years.
On 1st October 2014, a truck was purchased for ₹ 8,00,000 by Laxmi Transports Ltd. Depreciation was provided @ 15% p.a. under diminishing balance method. On 31st March 2017, the above truck was sold for ₹ 5,00,000. Accounts are closed on 31st March every year. Find out the profit or loss made on the sale of the truck.
A machine costing ₹ 23,000 is estimated to have a life of 7 years and the scrap value is estimated at ₹ 2,000 at the end of its useful life. Find out the amount of depreciation p.a.
On 1st Jan 2015, Triveni Traders Raigad purchased a Plaint for ₹ 12,000, and installation charges being ₹ 3,000. On 1st July 2016 another Plant was purchased for ₹ 25,000, on 1st April 2017 another Plant was purchased for ₹ 27,000, wages paid for installation amounted to ₹ 2,000. Carriage paid for the Plant amounted to ₹ 1,000. Show Plant Account up to 31st March 2018 assuming that the rate of depreciation is @ 10% p.a. on Straight Line Method.
Mahesh Traders Solapur purchased Furniture on 1st April 2014 for ₹ 20,000. In the same year on 1st, Oct. additional Furniture was purchased for ₹ 10,000.
On 1st Oct. 2015, the Furniture purchased on 1st April 2014 was sold for ₹ 15,000 and on the same day, a new Furniture was purchased for ₹ 20,000.
The firm charged depreciation at 10% p.a. on the Reducing Balance Method.
Prepare Furniture Account and Depreciation Account for the year ending 31st March 2015, 2016, and 2017.
On 1st April 2015, Suman Traders purchased Machinery for ₹ 30,000. On 1st Oct. 2015, they purchased further Machinery costing ₹ 20,000.
On 1st Oct. 2016, they sold the Machine purchased on 1st April 2015 for ₹ 18,000 and brought another Machine for ₹ 15,000 on the same date.
Depreciation is provided on Machinery @ 20% p.a. on the Diminishing Balance Method and the financial year closes on 31st March every year.
Prepare the Machinery Account and Depreciation Account for the year 2015-16, 2016-17, and 2017-18.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹75,000 on 1 Oct 2015 and spent ₹5,000 on its transport and installation. Another Machine for ₹45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on the Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
On 1st April 2015 Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years The Registration charges of the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹75,000 on 1 Oct 2015 and spent ₹5,000 on its transport and installation. Another Machine for ₹45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on the Written Down Value Method, on 31st March every year.
Prepare Printing Machine Account for the first four years.
In the Written Down Value Method, depreciation is calculated on the:
The Annuity Method is most suitable when:
Which depreciation method helps a firm accumulate funds for replacing an asset after its useful life?
Under which method might two identical machines purchased at the same cost show different depreciation expenses in two companies?
The Double Declining Balance Method applies depreciation:
