Question

On January 01, 2014, a Limited Company purchased machinery for ₹ 20,00,000. Depreciation is provided @15% p.a. on diminishing balance method. On March 01, 2016, one fourth of machinery was damaged by fire and ₹ 40,000 were received from the insurance company in full settlement. On September 01, 2016 another machinery was purchased by the company for ₹ 15,00,000. Write up the machinery account from 2010 to 2013. Books are closed on December 31, every year.

Answer 1

Dr.	Machinery Account						Cr.
Date	Particulars	J.F.	Amount ₹	Date	Particulars	J.F.	Amount ₹
2016				2016
Jan.01	Balance b/d (i)			Mar.01	Depreciation
	(10,83,750 +				(1/4 Machine
	3,61,250)		14,45,000		for 2 Months)		9,031
Sep.01	Bank (ii)		15,00,000	Mar.01	Bank		40,000
				Mar.01	Profit and Loss		3,12,219
				Dec.31	Depreciation		2,37,563
					(i) 1,62,563 (3/4th of machine) (ii) 75,000
				Dec.31	Balance c/d (i) 9,21,187 (ii) 14,25,000		23,46,187
			29,45,000				29,45,000
2017				2017
Jan.01	Balance b/d (i) 9,21,187 (ii) 14,25,000		23,46,187	Dec.31	Depreciation (i) 1,38,177. (ii) 2,13,750		3,51,927
				Dec.31	Balance c/d (i) 7,83,009 (ii) 12,11,250		19,94,260
			23,46,187				23,46,187

Working Note:

Machine (i)

Years	January 01		Depreciation (15% p.a.)	=	Closing Balance
2014	20,00,000	–	3,00,000	=	17,00,000
2015	17,00,000	–	2,55,000	=	14,45,000
2016	14,45,000

1/4^th of Machine (i)

Years	Opening Balance		Depreciation (15% p.a.)	=	Closing Balance
2014	5,00,000	–	75,000	=	4,25,000
2015	4,25,000	–	63,750	=	3,61,250
2016	3,61,250	–	9,031 (2 months)	=	3,52,219

 

Value on 1 Mar. 2016	=	3,52,219
Insurance Claim	=	40,000
Loss		₹ 3,12,219