Advertisements
Advertisements
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.
Advertisements
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
APPEARS IN
RELATED QUESTIONS
Answer in One Sentence only:
Which account is debited when expenses are paid on installation of Machinery?
Write the word/term/phrase which can substitute the following statement:
The type of asset on which depreciation is charged.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount spent on installation of new machinery is a ______ expenditure.
State whether the following statement is True or False with reasons:
Depreciation is charged on fixed assets.
State whether the following statement is True or False with reasons:
Depreciation is charged on Current Assets only.
Do you agree or disagree with the following statement:
Under written down value method the Depreciation curve slopes parallel to 'X' axis.
Do you agree or disagree with the following statement:
The rate of depreciation depends upon the life of fixed asset.
Do you agree or disagree with the following statement:
By charging depreciation on fixed assets ascertainment of true and fair financial position is possible.
Complete the following sentence:
Wages paid for Installation/fixation of Machinery is debited to ______ account.
Complete the following sentence:
The amount spent on installation of Machinery is a ______ expenditure.
Complete the following sentence:
______ is the value which an asset realises at the end of its useful life.
If the total charge of depreciation and maintenance cost are considered, the method that provides a uniform charge is ______.
Give the formula to find out the amount and rate of depreciation under straight line method of depreciation.
State the limitations of written down value method of depreciation.
From the following particulars, give journal entries for 2 years and prepare machinery account under straight-line method of providing depreciation:
Machinery was purchased on 1.1.2016
Price of the machine ₹ 36,000
Freight charges ₹ 2,500
Installation charges ₹ 1,500
Life of the machine 5 years
A manufacturing company purchased on 1st April 2010, a plant and machinery for ₹ 4,50,000 and spent ₹ 50,000 on its installation. After having used it for three years, it was sold for ₹ 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed installment method. Accounts are closed on 31st March every year. Calculate profit or loss on sale of machinery.
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.
A boiler was purchased on 1st January 2015 from abroad for ₹ 10,000. Shipping and forwarding charges amounted to 12,000. Import duty ₹ 7,000 and expenses of installation amounted to ₹ 1,000. Calculate depreciation for the first 3 years @10% p.a. on diminishing balance method assuming that the accounts are dosed 31st December each 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 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.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1 Oct 2015 and spent ₹ 5,000 on its transport and installation. Another Machine for ₹ 45,000 was purchased on 1st Jan 2017. Depreciation is charged at the rate of 20% on Written Down Value Method, on 31st march every year.
Prepare Printing Machine Account for the first four years.
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.
Which of the following methods charges an equal amount of depreciation every year?
Which depreciation method helps a firm accumulate funds for replacing an asset after its useful life?
A factory’s machine remains idle for several months due to maintenance breakdowns. Which method ensures that depreciation is not overcharged during these idle periods?
The Sum-of-the-Years’-Digits Method results in:
The Double Declining Balance Method applies depreciation:
