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Question
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:
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Solution
In the books of Radhika-Masale, Amravati
| Dr. | Plant Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2015 | 2015 | ||||||
| Jan. 1 | To Cash/Bank A/c | 80,000 | Mar. 31 | By Depreciation A/c | 2,000 | ||
| Mar. 31 | By Balance c/d | 78,000 | |||||
| 80,000 | 80,000 | ||||||
| 2015 | 2016 | ||||||
| Apr. 1 | To Balance b/d | 78,000 | Mar. 31 | By Depreciation A/c | 7,800 | ||
| Mar. 31 | By Balance c/d | 70,200 | |||||
| 78,000 | 78,000 | ||||||
| 2016 | 2017 | ||||||
| Apr. 1 | To Balance b/d | 70,200 | Jan. 1 | By Cash/Bank A/c | 60,000 | ||
| Apr. 1 | To Cash/Bank A/c | 70,000 | Jan. 1 | By Depreciation A/c | 5,265 | ||
| (60,000 + 10,000) | Jan. 1 | By P/L A/c (loss on sale) | 4,935 | ||||
| 2017 | Mar. 31 | By Depreciation A/c | 7,500 | ||||
| Jan. 1 | To Cash/Bank A/c | 20,000 | Mar 31 | By Balance c/d | 82,500 | ||
| 1,60,200 | 1,60,200 | ||||||
| 2017 | |||||||
| Apr. 1 | To Balance b/d | 82,500 | |||||
| Dr. | Depreciation Account | Cr. | |||||
| Date | Particulars | J.F. | Amt ₹ | Date | Particulars | J.F. | Amt ₹ |
| 2015 | 2015 | ||||||
| Mar. 31 | To Plant A/c | 2,000 | Mar. 31 | By Profit and Loss A/c | 2,000 | ||
| 2,000 | 2,000 | ||||||
| 2016 | 2016 | ||||||
| Mar. 31 | To Plant A/c | 7,800 | Mar. 31 | By Profit and Loss A/c | 7,800 | ||
| 7,800 | 7,800 | ||||||
| 2017 | 2017 | ||||||
| Jan. 1 | To Plant A/c | 5,265 | Mar. 31 | By Profit and Loss A/c | 12,765 | ||
| Mar. 31 | To Plant A/c | 7,500 | |||||
| 12,765 | 12,765 | ||||||
Working Notes:
1. Calculation of Profit or loss on sale of plant:
Original cost on 01.01.2015 = ₹ 80,000
Less: Depreciation for 2014.15. (3 months) = ₹ 2,000
W.D.V. on 01.04.2015 = ₹ 78,000
Less: Depreciation for 2015 -16 (12 months) = ₹ 7,800
W.D.V. on 01.04.2016 = ₹ 70,200
Less: Depreciation for 2016 -17 (9 months) = ₹ 5,265
W.D.V. on date of sale = ₹ 64,935
Less: Selling price = ₹ 60,000
∴ Loss on sale of plant = ₹ 4,935
2. Calculation of Depreciation for 2016-17:
(a) Opening balance on 01.04.2016 = ₹ 70,200
Less: W.D.V. of plant sold on 01.04.2016 = ₹ 70,200 Nil – 10% = Nil
(b) Purchase of plant on 01.04.2016 – 10% – 12months = ₹ 7,000
(c) Purchase of plant on 01.01.2017 – 10% – 3m months = ₹ 500
Total = ₹ 7,500
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