Question No 20 Chapter No 12

20.On 1st April 2008, a Company purchased 6 machines for 50,000 each. Depreciation at the rate of 10% p.a. is charged on the Straight Line Method. The accounting year of the Company ends on 31st March and the depreciation is credited to a separate ‘Provision for Depreciation Account’.
On 1st October 2010, one machine was sold for 30,000 and on 1st April 2011, a second machine was sold for 24,000. You are required to prepare Machinery Account and Provision for Depreciation Account for four years ending 31st March 2012.

## The solution of Question No 20 Chapter No 12: –

 Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 1st Jul.2016 To Bank A/c (50,000 + 50,000 + 2,00,000) 3,00,000 31st Mar 2017 By Balance C/d 3,00,000 3,00,000 3,00,000 1st Apr.2017 To Balance b/f 3,00,000 31st Mar 2018 By Balance C/d 3,00,000 3,00,000 3,00,000 1st Apr.2018 To Balance b/f 6,00,000 1st Oct.2018 By Provision forDepreciation A/c 12,500 1st Oct.2018 By Bank A/c (Sale) 30,000 1st Oct.2018 By Profit & Loss A/c 7,500 31st Mar 2019 By Balance C/d(50,000 +2,00,000) 2,50,000 3,00,000 3,00,000 1st Apr.2019 To Balance b/f 2,50,000 1st Apr.2019 By Provision forDepreciation A/c 15,000 1st Apr.2019 By Bank A/c (Sale) 24,000 1st Apr.2019 By Profit & Loss A/c 11,000 31st Mar 2020 By Balance C/d(50,000 +2,00,000) 2,00,000 2,50,000 2,50,000
 Dr. Provision for Depreciation  A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 31st Mar.2017 By Depreciation A/c (5,000 + 5,000 + 20,000) 30,000 31stMar.2017 Balance c/d 30,000 30,000 30,000 31st Apr 2017 By Balance b/d 30,000 31stMar.2018 Balance c/d 60,000 31st Mar 2018 By Depreciation A/c (5,000 + 5,000 + 20,000) 30,000 60,000 60,000 1st Oct.2019 To Balance b/f(5,000 + 5,000 + 2,500) 12,500 31st Apr 2018 By Balance b/d 60,000 1st Oct.2019 By Depreciation A/c (M1) 2,500 1st Apr.2018 To Balance b/f 75,000 1st Jan.2019 By Depreciation A/c (for10 months) 25,000 87,500 87,500 1st Apr.2019 To Balance b/f(5,000 + 5,000 + 5,000) 15,000 1st Apr.2019 By Balance b/d 75,000 1st Apr.2019 By Depreciation A/c 20,000 1st Apr.2020 To Balance b/f 80,000 95,000 95,000

Working Note:
Calculation of Profit or Loss on Sale M1

 Statement Showing profit or loss on the sale of Machinery Particulars Amount Machinery Purchase on of Equipment as on 1st Apr. 2016 50,000 Less: – Amount of Depreciation charged on the year 2016-17 50,000 *10%* 12/12 5,000 Amount of Depreciation charged on the year 2017-18 50,000 *10%* 12/12 5,000 Amount of Depreciation charged on the year 2018-19 50,000 *10%* 12/12 2,500 Book value of asset as on 1st Oct, 2018 37,500 Sale Price of Machinery 30,000 Loss on the sale of the asset 7,500

Calculation of Profit & Loss on Sale of M2

 Statement Showing profit or loss on the sale of Machinery Particulars Amount Machinery Purchase on of Equipment as on 1st Apr. 2016 50,000 Less: – Amount of Depreciation charged on the year 2016-17 50,000 *10%* 12/12 5,000 Amount of Depreciation charged on the year 2017-18 50,000 *10%* 12/12 5,000 Amount of Depreciation charged on the year 2018-19 50,000 *10%* 12/12 5,000 Book value of asset as on 1st Oct, 2018 35,000 Sale Price of Machinery 24,000 Loss on the sale of the asset 11,000

Note: For making calculation easy, Machinery purchased on April 01, 2008, has been divided into three i.e. M1, M2, and M3.
Thus,
M1: Rs 50,000 (sold for Rs 30,000 on Oct. 01, 2010)
M2: Rs 50,000 (sold for Rs 24,000 on Apr. 01, 2011)
M3: Rs 2,00,000 (includes the cost of 4 machines)

Depreciation | Meaning | Methods | Examples

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