Question No 02 Chapter No 12

02.On 1st April, 2015, a Company bought Plant and Machinery costing 68,000. It is estimated that its working life is 10 years, at the end of which it will fetch 8,000. Additions are made on 1st April, 2016 to the value of 40,000 (Residual value 4,000). More additions are made on Oct. 1, 2017 to the value of 9,800 (Break up value 800). The working life of both the additional Plant and machinery is 20 years.
Show the Plant and Machinery account for the first four years, if depreciation is written off according to Straight Line Method. The accounts are closed on 31st March every year.

## The solution of Question No 02 Chapter No 12: –

 Dr. Machinery A/c Cr. Dat Particulars J.F. Amount Date Particulars J.F. Amount 1st Apr.2015 To Bank A/c (P1) 68,000 31st Mar2016 By Deprecation A/c 6,000 31st Mar2016 By Balance C/d 62,000 68,000 68,000 1st Apr 2016 To Balance b/f 62,000 31st Mar2017 By Deprecation A/cP1 & P2(6,000 + 1,800) 7,800 1st Apr 2016 To Bank A/c (P2) 40,000 31st Mar2017 By Balance C/d 94,000 1,02,000 1,02,000 1st Apr 2017 To Balance b/f 94,200 31st Mar2018 By Deprecation A/cP1,P2 & P3(6,000 + 1,800+ 225) 25,000 1st Oct 2017 To Bank A/c (P3) 9,800 31st Mar2018 By Balance C/d 95,975 1,04,000 1,04,000

Working Note:
Calculation of Depreciation
The method of calculating the Deprecation rate:

 Amount of Depreciation = Cost of assets- Estimated Realizable or Scrap value Number of years of expected useful life

P1 Cost of assets = Cost of Machine = 68,000
Number of years of expected useful life = 10 years
Estimated Retaliated or Scrap value = 8,000

 Amount of Depreciation = 68,000 -8,000 10 = 6,000

P2 Cost of assets = Cost of Machine = 40,000
Number of years of expected useful life = 10 years
Estimated Retaliated or Scrap value = 4,000

 Amount of Depreciation = 40,000 – 4,000 20 = 1,800

P3 Cost of assets = Cost of Machine = 9,800
Number of years of expected useful life = 10 years
Estimated Retaliated or Scrap value = 800

 Amount of Depreciation = 9,800 – 800 20 = 450

Depreciation | Meaning | Methods | Examples

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