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Question No 23 Chapter No 14
23. A company purchased machinery for ₹ 50,000 on 1st October 2015. Another machinery costing ₹10,000 was purchased on 1st December 2016. On 31st March 2018, the machinery purchased in 2015 was sold at a loss of ₹ 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.
The solution of Question No 23 Chapter No 14: -
| Dr. | Machinery A/c | Cr. | |||||
| Date | Particulars |
J.F. | Amount | Date | Particulars |
J.F. | Amount |
|---|---|---|---|---|---|---|---|
| 01/10/15 | To Bank A/c | 50,000 | 31/03/16 | By Deprecation A/c*1 | 3,750 | ||
| 31/03/16 | By Balance C/d | 46,250 | |||||
| 50,000 | 50,000 | ||||||
| 01/04/16 | To Balance b/d | 46,250 | 31/03/17 | By Deprecation A/c*2 | 7,438 | ||
| 01/12/16 | To Bank A/c | 10,000 | 31/03/17 | By Balance C/d | 48,812 | ||
| 56,250 | 56,250 | ||||||
| 01/04/17 | To Balance b/d | 48,812 | 31/03/18 | By Deprecation A/c*3 | 7,322 | ||
| 31/03/18 | By Bank A/c | 28,415 | |||||
| 31/03/18 | By loss on the sale of the Machinery | 5,000 | |||||
| 31/03/18 | By Balance C/d | 8,075 | |||||
| 48,812 |
48,812 | ||||||
Working Note:-
*1:- Calculation of the amount of Depreciation on furniture for the year 2015-16
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 50,000
Rate of Depreciation = 15%
Period = from 01/10/2015 to 31/03/2016 i.e.6months
(from the date of purchase/Beginning balance to the end of the financial year)
=50,000 X1 5/100 X 6/12
Depreciation =3,750
Total Depreciation for the year =3,750
*2:- Calculation of the amount of Depreciation on furniture for the year 2015-16
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 46,250
Rate of Depreciation = 15%
Period = from 01/03/2016 to 31/03/2017 i.e.12months
(from the date of purchase/Beginning balance to the end of the financial year)
=46,250 X1 5/100 X 12/12
| Depreciation | 6,938 |
Purchased on 1st December 2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 10,000
Rate of Depreciation = 15%
Period = from 01/12/2016 to 31/03/2017 i.e.4months
(from the date of purchase/Beginning balance to the end of the financial year)
=10,000 X1 5/100 X 4/12
| Depreciation | 500 |
| Total Depreciation for the year | 7,438 |
*3:- Calculation of the amount of Depreciation on furniture for the year 2017-18
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 39,315
Rate of Depreciation = 15%
Period = from 01/03/2016 to 31/03/2017 i.e.12months
(from the date of purchase/Beginning balance to the end of the financial year)
=39,315 X1 5/100 X 12/12
| Depreciation | 5,897 |
Purchased on 1st December 2016
Depreciation = Value of Asset X Rate of Depreciation X Period
Value of Asset = 9,500
Rate of Depreciation = 15%
Period = from 01/06/2017 to 31/03/2018 i.e.12 months
(from the date of purchase/Beginning balance to the end of the financial year)
=9,500 X 15/100 X 4/12
| Depreciation | 1,425 |
| Total Depreciation for the year | 7,322 |
| Statement Showing profit or loss on the sale of Machinery | |
| Particulars |
Amount |
|---|---|
| Book value of machinery as on 1st October 2015 when it was purchased | 50,000 |
| Less: - Amount of Depreciation charged on the year 2015-16 | |
| 50,000*15%*6/12 | 3,750 |
| Amount of Depreciation charged on the year 2016-17 | |
| 46,250*15%*12/12 | 6,938 |
| Amount of Depreciation charged on the year 2017-18 | |
| 39,315*15%*12/12 | 2,835 |
| Book value of the asset as on 1st March 2018 | 33,415 |
| Sale Price of Machinery | 28,415 |
| loss on the sale of the asset | 5,000 |
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