Advertisements
Advertisements
Question
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 charge for 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.
Advertisements
Solution
| In the books of Farid, Nasik Motor Car Account | |||||||
| Date | Particulars | J.F. | Amt (₹) | Date | Particulars | J.F. | Amt (₹) |
| 2015 | 2016 | ||||||
| Apr. 1 | To Cash/Bank A/c | 60,000 | Mar. 31 | By Depreciation A/c | 5,000 | ||
| Mar. 31 | By Balance c/d | 55,000 | |||||
| (55,000 + 5,000) | 60,000 | 60,000 | |||||
| 2016 | 2017 | ||||||
| Apr. 1 | To Balance b/d | 55,000 | Mar. 31 | By Depreciation A/c | 5,000 | ||
| Mar. 31 | By Balance c/d | 50,000 | |||||
| 55,000 | 55,000 | ||||||
| 2017 | 2018 | ||||||
| Apr. 1 | To Balance b/d | 50,000 | Mar. 31 | By Depreciation A/c | 5,000 | ||
| Mar. 31 | By Balance e/d | 45,000 | |||||
| 50,000 | 50,000 | ||||||
| 2018 | 2019 | ||||||
| Apr. 1 | To Balance b/d | 45,000 | Mar. 31 | By Depreciation A/c | 5,000 | ||
| Mar. 31 | By Balance c/d | 40,000 | |||||
| 45,000 | 45,000 | ||||||
| 2019 | |||||||
| Apr. 1 | To Balance b/d | 40,000 | |||||
Working Note:
Calculation of Depreciation per annum:
Depreciation = `"Original cost of an asset (−) Scrap value"/"Estimated life of asset in years"`
= `(60,000 − 10,000)/10`
= `(50,000)/10`
= ₹ 5,000 p.a.
APPEARS IN
RELATED QUESTIONS
Answer in One Sentence only:
Which account is credited when depreciation is charged?
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:
Excess of Selling price of fixed asset over its Written Down Value.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount that a fixed asset is expected to realise on its disposal is known as ______
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount of depreciation remains constant every year under ______
State whether the following statement is True or False with reasons:
Depreciation need not be charged when business is making losses.
Complete the following sentence:
The amount spent on installation of Machinery is a ______ expenditure.
A depreciable asset may suffer obsolescence due to ______.
Which method shall be efficient, if repairs and maintenance cost of an asset increases as it grows older.
What is the annuity method?
A firm purchased a plant for ₹ 40,000. Erection charges amounted to ₹ 2,000. The effective life of the plant is 5 years. Calculate the amount of depreciation per year under the straight-line method.
Ragul purchased machinery on April 1, 2014 for ₹ 2,00,000. On 1st October 2015, a new machine costing ₹ 1,20,000 was purchased. On 30th September 2016, the machinery purchased on April 1, 2014 was sold for ₹ 1,20,000. Books of accounts are closed on 31st March and depreciation is to be provided at 10% p.a. on straight line method. Prepare machinery account and depreciation account for the years 2014-15 to 2016-17.
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.
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.
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.
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.
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:
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.
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.
The Annuity Method is most suitable when:
A firm buys a machine that wears out faster in early years but provides greater efficiency initially. Which depreciation method would most accurately reflect this pattern?
The Sum-of-the-Years’-Digits Method results in:
The Double Declining Balance Method applies depreciation:
