Question No 18 Chapter No 12

18. A Company, which closes its books on 31st March every year, purchased on 1st July 2017, machinery costing 30,000. It purchased further machinery on 1st January 2018, costing 20,000, and on 1st October 2011, costing 10,000. On 1st April 2019, one-third of the machinery installed on 1st July 2019, became obsolete and was sold for 3,000.
Show how the machinery account would appear in the books of the Company, it is given that machinery was depreciated by Diminishing Balance Method at 10% per annum. What would be the balance of the Machinery Account on 1st April 2020?

## The solution of Question No 18 Chapter No 12: –

 Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 1st Jul.2017 To Bank A/c (10,000+ 20,000) 30,000 31st Mar 2018 By Deprecation A/c(750+ 1,500 + 500) 2,750 1st Jan.2018 To Bank A/c 20,000 31st Mar 2018 By Balance C/d 47,250 50,000 50,000 1st Apr.2018 To Balance b/f 47,250 31st Mar 2019 By Deprecation A/c (925 + 1,850 +1,950 + 500) 5,225 1st Oct.2018 To Bank A/c 10,000 31st Mar 2019 By Balance C/d 52,025 57,250 57,250 1st Apr.2019 To Balance b/f 52,025 1st Apr.2019 By Bank A/c 3,000 1st Apr.2019 By Profit & Loss A/c 5,325 31st Mar 2020 By Deprecation A/c (1,665 + 1,755 + 950) 4,370 31st Mar 2020 By Balance C/d (7,290 + 29,160 + 25,650) 39,330 52,025 52,025

Working Note:
Calculation of Profit or Loss on Sale

 Statement Showing profit or loss on the sale of Machinery Particulars Amount Machinery Purchase on of Equipment as on 1st Jul. 2017 10,000 Less: – Amount of Depreciation charged on the year 2017-18 10,000 *10%* 12/12 750 Amount of Depreciation charged on the year 2018-19 9,250 *10%* 12/12 925 Book value of an asset as of 1st Oct 2019 8,325 Sale Price of Machinery 3,000 Profit on the sale of the asset 5,325

Note: In order to make easy calculation, machinery purchased on July 01, 2010 has been divided into two parts i.e. M1 and M2. Thus, M1: 1/3rd value i.e Rs 10,000 (sold for Rs 3,000) M2: 2/3rd value i.e. Rs 40,000 (remained in the business)

Depreciation | Meaning | Methods | Examples

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