Question No 21 Chapter No 12

21. On 1st July 2015, ABC Ltd. purchase 4 machines for 80,000 each. The accounting year of the company ends on 31st March every year. Depreciation is provided at the rate of 15% p.a. on original cost. On 1st April, 2017 one machine was sold for 50,000 and on 1st January 2019, a second machine was sold for 40,000. Another machine with a higher capacity which cost 2,00,000 was purchased on 1st January, 2019.
You are required to show: (i) Machinery Account, (ii) Depreciation Account, and (iii) Provision for Depreciation Account for four years
ending 31st March, 2019.

## The solution of Question No 21 Chapter No 12: –

 Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 1st Jul.2015 To Bank A/c (80,000 + 80,000 + 1,60,000) 3,20,000 31st Mar 2016 By Balance C/d 3,20,000 3,20,000 3,20,000 1st Apr.2016 To Balance b/f 3,20,000 31st Mar 2017 By Balance C/d 3,20,000 3,20,000 3,20,000 1st Apr.2017 To Balance b/f 3,20,000 1st Apr.2017 By Provision forDepreciation A/c 21,000 1st Apr.2017 By Bank A/c (Sale) 50,000 1st Apr.2017 By Profit & Loss A/c 9,000 31st Mar 2018 By Balance C/d(80,000 + 1,60,000) 2,40,000 3,20,000 3,20,000 1st Apr.2019 To Balance b/f 2,40,000 1st Jan.2019 By Provision forDepreciation A/c 42,000 1st Jan.2019 To Profit and Loss A/c (Profit on Sale of M2) 2,000 1st Jan.2019 By Bank A/c (Sale) 40,000 1st Jan.2019 To Bank A/c (M4) 2,00,000 31st Mar 2020 By Balance C/d(1,60,000 + 2,00,000) 3,60,000 4,42,000 4,42,000
 Dr. Depreciation A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 31stMar2016 To Provision for Depreciation A/c 36,000 31st Mar 2016 By Profit & Loss A/c 36,000 36,000 36,000 31stMar.2017 To Provision for Depreciation A/c 48,000 31st Mar 2017 By Profit & Loss A/c 48,000 48,000 48,000 1st Apr.2018 To Provision for Depreciation A/c 36,000 31st Mar 2018 By Profit & Loss A/c 36,000 36,000 36,000 1st Apr.2019 To Balance b/f 40,500 31st Mar 2020 By Profit & Loss A/c 40,500 40,500 40,500
 Dr. Provision for Depreciation  A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 31st Mar.2016 By Depreciation A/c (9,000 + 9,000 + 18,000) 36,000 31stMar.2016 Balance c/d 36,000 36,000 36,000 31st Apr 2017 By Balance b/d 36,000 31stMar.2018 Balance c/d 84,000 31st Mar 2018 By Depreciation A/c (5,000 + 5,000 + 20,000) 48,000 84,000 84,000 1st Oct.2019 To Balance b/f(9,000 + 12,000) 21,000 31st Apr 2018 By Balance b/d 84,000 1st Apr.2018 To Balance b/f 99,000 31st Mar.2019 By Depreciation A/c (12,000 + 24,000) 36,000 1,20,000 1,20,000 1st Jan.2019 To Balance b/f(9,000 + 12,000 + 12,000 + 9,000) 42,000 31st Apr 2019 By Balance b/d 99,000 31st Mar.2019 By Depreciation A/c 20,000 1st Apr.2020 To Balance b/f 97,500 31st Mar.2019 By Depreciation A/c(24,000 + 7,500) 31,500 1,39,500 1,39,500

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 Jul. 2015 80,000 Less: – Amount of Depreciation charged on the year 2015-16 80,000 *15%* 9/12 9,000 Amount of Depreciation charged on the year 2018-19 80,000 *15%* 12/12 12,000 Book value of the asset as of 1st Oct 2018 59,000 Sale Price of Machinery 50,000 Loss on the sale of the asset 9,000

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 Jul. 2015 80,000 Less: – Amount of Depreciation charged on the year 2015-16 80,000 *15%* 9/12 9,000 Amount of Depreciation charged on the year 2016-17 80,000 *15%* 12/12 12,000 Amount of Depreciation charged on the year 2017-18 80,000 *15%* 12/12 12,000 Amount of Depreciation charged on the year 2018-19 80,000 *15%* 9/12 9,000 Book value of the asset as of 1st Oct 2018 38,000 Sale Price of Machinery 40,000 Profit on the sale of the asset 2,000

Note: In order to make easy calculations, machinery purchased on July 01, 2015, has been divided into three parts i.e. M1, M2, and M3.
Thus,
M1: Rs 80,000 (sold for Rs 50,000 on Apr. 01, 2017)
M2: Rs 80,000 (sold for Rs 40,000 on Jan. 01, 2019)
M3: Rs 1,60,000 (includes the cost of 2 machines)

Depreciation | Meaning | Methods | Examples

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