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Question
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.
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Solution
| In the books of Vishal Company, Dhule |
|||||||
| Dr. | Printing Machinery Account | Cr. | |||||
| Date | Particulars | J.F. | Amt (₹) | Date | Particulars | J.F. | Credit (₹) |
| 2016 | 2017 | ||||||
| Apr.1 | To Cash/Bank A/c | 60,000 | Mar.31 | By Depreciation A/c | 6,000 | ||
| Mar.31 | By Balance c/d | 54,000 | |||||
| 60,000 | 60,000 | ||||||
| 2017 | 2018 | ||||||
| Apr.1 | To Balance b/d | 54,000 | Mar.31 | By Depreciation A/c 5,400 + 1,500) | 6,900 | ||
| Oct.1 | To Cash/Bank A/c | 30,000 | Mar.31 | By Balance c/d | 77,100 | ||
| 84,000 | 84,000 | ||||||
| 2018 | 2019 | ||||||
| Apr.1 | To Balance b/d | 77,100 | Jan.1 | By Cash/Bank A/c | 18,000 | ||
| July. 1 | To Cash/Bank A/c | 20,000 | Jan.1 | By Depreciation A/c | 1,215 | ||
| 2019 | Mar.31 | By Depreciation A/c | 7,590 | ||||
| Jan.1 | To Profit and Loss A/c | 3,015 | Mar.31 | By Balance c/d | 73,310 | ||
| (Profit on sale) | |||||||
| 1,00,115 | 1,00,115 | ||||||
| 2019 | |||||||
| Apr.1 | To Balance b/d | 73,310 | |||||
| Journal of Vishal Company | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit ₹ |
| 2018 July 1 | Machinery A/c ...Dr. | 20,000 | ||
| To Cash/Bank A/c | 20,000 | |||
| (Being purchase of machinery) | ||||
| 2019 Jan. 1 | To Cash/Bank A/c ...Dr. | 18,000 | ||
| Machinery A/c | 18,000 | |||
| (Being Sale machinery) | ||||
| Jan. 1 | Depreciation A/c ...Dr. | 1,215 | ||
| To Machinery A/c | 1,215 | |||
| (Being depreciation charged on machinery sold) | ||||
| Jan. 1 | Machinery A/c ...Dr. | 3,015 | ||
| To Profit and Loss A/c | 3,015 | |||
| (Being profit on sale on machinery) | ||||
| Mar. 31 | Depreciation A/c ...Dr. | 7,590 | ||
| To Machinery A/c | 7,590 | |||
| (Being in Depreciation charged at the end of the year) | ||||
| Mar. 31 | Profit and Loss A/c ...Dr. | 8,805 | ||
| To Depreciation A/c | 8,805 | |||
| (Being balance in Depreciation A/c transferred to P& L A/c) | ||||
| Total (₹) | 58,625 | 58,625 | ||
Working Notes:
1. Calculation of Profit or Loss on sale as Machine:
Original cost on 01.04.2016 = ₹ 20,000
Less: Dep. for 2016-17 (12 months) = ₹ 2,000
W.D.V. on 01.04.2017 = ₹ 18,000
Less : Dep. for 2016-17 (12 months) = ₹ 1,800
W.D.V. on 01.04.2018 = ₹ 16,200
Less : Dep. for 2018-19 (9 months) = ₹ 1,215
W.D.V. on date of sale = ₹ 14,985
Less : Selling Price = ₹ 18,000
∴ Profit on sale & machine = ₹ 3,015
2. Depreciation for 2018-19
(a) Opening balance on 01.04.2018 = ₹ 77,100
Less : W.D.V. of Machine sold on 01.04.2018 = ₹ 16,200
10% depreciation on 60,900 = ₹ 6,090
(b) Purchase of Machine on 01.07.2018 20,000 – 10% – 9 months = ₹ 6,090 + ₹ 1,500 = ₹ 7,590
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