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 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:
Method of depreciation that cannot reach to zero value.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount of depreciation reduces year after year under ______
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:
Wages paid for installation of Machinery are debited to Wages A/c.
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:
Depreciation is charged on ______ asset.
Complete the following sentence:
Depreciation Account is a ______ account.
A depreciable asset may suffer obsolescence due to ______.
Depreciation is to be calculated from the date when ______.
List out the various methods of depreciation.
What is the annuity method?
State the limitations of written down value method of depreciation.
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.
A firm acquired a machine on 1st April 2015 at a cost of ₹ 50,000. Its life is 6 years. The firm writes off depreciation @ 30% p.a. on the diminishing balance method. The firm closes its books on 31st December every year. Show the machinery account and depreciation account for three years starting from 1st April 2015.
If the cost of the Computer is ₹ 40,000 and depreciation is to be charged at 8% p.a. Calculate the amount of depreciation.
On 1st January 2017 ‘Sai Industries, Nagpur’ purchased a Machine costing ₹ 1,65,000 and spent ₹ 15,000 for its installation charges. The estimated life of the Machine is to be 10 years and the scrap value at the end of its life would be ₹ 30,000. On 1st October 2018, the entire Machine was sold for ₹ 1,50,000.
Show Machinery Account, Depreciation Account, for the years 2016-17, 2017-18, and 2018-19 assuming that the accounts are closed on 31st March every year.
M/s Omkar Enterprise Jalgaon acquired a Printing Machine for ₹ 75,000 on 1st 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.
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, Suman Traders purchased Machinery for ₹ 30,000. On 1st Oct. 2015, they purchased further Machinery costing ₹ 20,000.
On 1st Oct. 2016, they sold the Machine purchased on 1st April 2015 for ₹ 18,000 and brought another Machine for ₹ 15,000 on the same date.
Depreciation is provided on Machinery @ 20% p.a. on the Diminishing Balance Method and the financial year closes on 31st March every year.
Prepare the Machinery Account and Depreciation Account for the year 2015-16, 2016-17, and 2017-18.
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.
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.
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 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.
In the Written Down Value Method, depreciation is calculated on the:
The Double Declining Balance Method applies depreciation:
