Question No 10 Chapter No 14 - T.S. Grewal 11 Class

Question No 10 Chapter No 14

10. On 1st April 2015, Shivam Enterprise purchased a second- hand machinery for Rs 52,000and spent Rs 2,000 on cartage, Rs 3,000 on unloading, Rs 2,000 on installation and Rs 1,000 as the brokerage of the middle man. It was estimated that the machinery will have a scrap value of Rs 6,000 at the end of its useful life, which is 10 year. On 31st December 2015, repairs and renewals amounted to Rs 2,500 were paid. On 1st October 2017, this machine was sold for Rs 30,600 and an amount of Rs 600 was paid as commission to the agent. Calculate the amount of annual depreciation and rate of depreciation. Also prepare the Machinery Account for the first 3 years, assuming that firm follows finical year for accounting.

The solution of Question No 10 Chapter No 14: –

Dr.	Machine A/c						Cr.
Date	Particulars	J.F.	Amount	Date	Particulars	J.F.	Amount
01/4/15	To Cash A/c		60,000	31/03/16	By Deprecation A/c		5,400
				31/03/16	By Balance C/d		54,600
			60,000				60,000
01/04/16	To Balance b/d		54,600	31/03/17	By Deprecation A/c		5,400
				31/03/17	By Balance C/d		29,475
			54,600				54,600
01/04/17	To Balance b/d		49,200	01/10/17	By Cash A/c		30,600
				01/10/17	By Deprecation A/c		2,700
				01/10/17	By loss on the sale of van A/c		16,500
			49,200				49,200

Working note:-

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

Rate of Deprecation can be calculated with the help of following formula:

Rate of Depreciation =	Amount of Depreciation	X100
	Total Cost of Assets

Cost of assets = Cost of Machine + cartage+ unloading + installation + brokerage of the middle man

Cost of assets = 52,000 + 2,000 + 3,000 + 2,000 + 1,000 = 60,000
Number of years of expected useful life = 10 years
Estimated Retaliated or Scrap value = 6,000

Amount of Depreciation =	60,000 – 6,000	= 5,400
	10

Rate of Deprecation can be calculated with the help of following formula:

Rate of Depreciation =	5,400	X100
	60,000

=9%

Statement Showing profit or loss on the sale of Machinery	Cr.
Particulars	Amount
Book value of machinery as on 1st April 2015 when it was purchased	12,000
Add: commission to an agent	600
	60,600
Less: – Amount of Depreciation charged on the year 2015-16
10,0009%12/12	5,400
Amount of Depreciation charged on the year 2016-17	5,400
Amount of Depreciation charged on the year 2017-18
10,0009%6/12	2,700
Sale Price of Machinery	30,600
Loss on the sale of the asset	16,500

Depreciation | Meaning | Methods | Examples

Advertisement-X

Thanks, Please Like and share with your friends

Comment if you have any question.

Also, Check out the solved question of previous Chapters: –

Chapter No. 1 – Introduction to Accounting
Chapter No. 2 – Basic Accounting Terms
Chapter No. 3 – Theory Base of Accounting, Accounting Standards and International Financial Reporting Standards(IFRS)
Chapter No. 4 – Bases of Accounting
Chapter No. 5 – Accounting Equation
Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
Goods and Services Tax(GST)
Chapter No. 7 – Origin of Transactions – Source Documents and Preparation of Vouchers
Chapter No. 8 – Journal
Chapter No. 9 – Ledger
Chapter No. 10 – Special Purpose Books I – Cash Book
Chapter No. 11 – Special Purpose Books II – Other Books
Chapter No. 12 – Bank Reconciliation Statement
Chapter No. 13 – Trial Balance
Chapter No. 14 – Depreciation
Chapter No. 15 – Provisions and Reserves
Chapter No. 16 – Accounting for Bills of Exchange
Chapter No. 17 – Rectification of Errors
Chapter No. 18 – Financial Statements of Sole Proprietorship
Chapter No. 19 – Adjustments in preparation of Financial Statements
Chapter No. 20 – Accounts from incomplete Records – Single Entry System
Chapter No. 21 – Computers in Accounting
Chapter No. 22 – Accounting Software – Tally
Chapter No. 5 – Accounting Equation
Chapter No. 6 – Accounting Procedures – Rules of Debit and Credit
Goods and Services Tax(GST)
Chapter No. 8 – Journal
Chapter No. 9 – Ledger
Chapter No. 10 – Special Purpose Books I – Cash Book