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Question
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.
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Solution
In the books of Mahesh Traders, Solapur
| Dr. | Furniture Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2014 | 2015 | ||||||
| Apr. 1 | To Cash/Bank A/c | 20,000 | Mar. 31 | By Depreciation A/c (2,000 + 500) | 2,500 | ||
| Oct. 1 | To Cash/Bank A/c | 10,000 | Mar. 31 | By Balance c/d | 27,500 | ||
| 30,000 | 30,000 | ||||||
| 2015 | 2015 | ||||||
| Apr. 1 | To Balance b/d | 27,500 | Oct. 1 | By Cash/Bank A/c | 15,000 | ||
| Oct. 1 | To Cash/Bank A/c | 20,000 | Oct. 1 | By Depreciation A/c | 900 | ||
| Oct. 1 | By Profit and Loss A/c (loss on sale) | 2,100 | |||||
| 2016 | |||||||
| Mar. 31 | By Depreciation A/c | 1,950 | |||||
| Mar. 31 | By Balance c/d | 27,550 | |||||
| 47,500 | 47,500 | ||||||
| 2016 | 2017 | ||||||
| Apr. 1 | To Balance b/d | 27,550 | Mar. 31 | By Depreciation A/c | 2,755 | ||
| Mar. 31 | By Balance c/d | 24,795 | |||||
| 27,550 | 27,550 | ||||||
| 2017 | |||||||
| Apr. 1 | To Balance b/d | 24,795 | |||||
| Dr. | Depreciation Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2015 | 2015 | ||||||
| Mar. 31 | To Furniture A/c | 2,500 | Mar. 31 | By Profit and Loss A/c | 2,500 | ||
| 2,500 | 2,500 | ||||||
| 2015 | 2016 | ||||||
| Oct. 1 | To Furniture A/c | 900 | Mar. 31 | By Profit and Loss A/c | 2,850 | ||
| 2016 | |||||||
| Mar. 31 | To Furniture A/c | 1,950 | |||||
| 2,850 | 2,850 | ||||||
| 2017 | 2017 | ||||||
| Mar. 31 | To Furniture A/c | 2,755 | Mar. 31 | By Profit and Loss A/c | 2,755 | ||
| 2,755 | 2,755 | ||||||
Working Notes:
1. Calculation of Profit or loss on sale of furniture:
Original cost on 01.04.2014 = ₹ 20,000
Less: Depreciation for 2014-15 (12 months) = ₹ 2,000
W.D.V. on 01.04.2015 = ₹ 18,000
Less: Depreciation for 2015-16 = ₹ 900
W.D.V. on date of sale = ₹ 17,100
Less: Selling price = ₹ 15,000
∴ Loss on sale of furniture = ₹ 2,100
2. Calculation of Depreciation for 2016 -17:
(a) Opening balance on 01.04.2015 = ₹ 27,500
Less: W.D.V. of furniture sold on 01.04.2015 = ₹ 18,000
9,500 – 10% = ₹ 950
(b) Purchase of furniture on 01.10.2015 – 10% – 6months = 950 + 1,000 = ₹ 1,950
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