Question No 21 Chapter No 12

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/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
1st Jul.2015To Bank A/c (80,000 + 80,000 + 1,60,000) 3,20,000    
    31st Mar 2016By Balance C/d  3,20,000
   3,20,000   3,20,000
1st Apr.2016To Balance b/f 3,20,000    
    31st Mar 2017By Balance C/d
 3,20,000
   3,20,000   3,20,000
1st Apr.2017To Balance b/f 3,20,0001st Apr.2017By Provision for
Depreciation A/c
 21,000
    1st Apr.2017By Bank A/c (Sale) 50,000
    1st Apr.2017By Profit & Loss A/c 9,000
    31st Mar 2018By Balance C/d(80,000 + 1,60,000)  2,40,000
   3,20,000   3,20,000
1st Apr.2019To Balance b/f 2,40,0001st Jan.2019By Provision for
Depreciation A/c
 42,000
1st Jan.2019To Profit and Loss A/c (Profit on Sale of M2) 2,0001st Jan.2019By Bank A/c (Sale) 40,000
1st Jan.2019To Bank A/c (M4) 2,00,000    
    31st Mar 2020By Balance C/d(1,60,000 + 2,00,000) 3,60,000
   4,42,000
   4,42,000
Dr.Depreciation A/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
31stMar2016To Provision for Depreciation A/c 36,000    
    31st Mar 2016By Profit & Loss A/c 36,000
   36,000   36,000
31stMar.2017To Provision for Depreciation A/c 48,000    
    31st Mar 2017By Profit & Loss A/c 48,000
   48,000   48,000
1st Apr.2018To Provision for Depreciation A/c 36,000    
    31st Mar 2018By Profit & Loss A/c 36,000
   36,000   36,000
1st Apr.2019To Balance b/f 40,500    
        
    31st Mar 2020By Profit & Loss A/c 40,500
   40,500
   40,500
Dr.Provision for Depreciation  A/cCr.
DateParticulars
J.F.AmountDateParticulars
J.F.Amount
    31st Mar.2016By Depreciation A/c (9,000 + 9,000 + 18,000) 36,000
31stMar.2016Balance c/d 36,000    
   36,000   36,000
    31st Apr 2017By Balance b/d 36,000
31stMar.2018Balance c/d 84,00031st Mar 2018By Depreciation A/c (5,000 + 5,000 + 20,000) 48,000
   84,000   84,000
1st Oct.2019To Balance b/f(9,000 + 12,000) 21,00031st Apr 2018By Balance b/d 84,000
1st Apr.2018To Balance b/f 99,00031st Mar.2019By Depreciation A/c (12,000 + 24,000) 36,000
   1,20,000   1,20,000
1st Jan.2019To Balance b/f(9,000 + 12,000 + 12,000 + 9,000) 42,00031st Apr 2019By Balance b/d 99,000
    31st Mar.2019By Depreciation A/c 20,000
1st Apr.2020To Balance b/f 97,500
31st Mar.2019By 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. 201580,000
Less: – Amount of Depreciation charged on the year 2015-16 
80,000 *15%* 9/129,000
Amount of Depreciation charged on the year 2018-19 
80,000 *15%* 12/1212,000
Book value of the asset as of 1st Oct 201859,000
Sale Price of Machinery 50,000
Loss on the sale of the asset9,000

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. 201580,000
Less: – Amount of Depreciation charged on the year 2015-16 
80,000 *15%* 9/129,000
Amount of Depreciation charged on the year 2016-17 
80,000 *15%* 12/1212,000
Amount of Depreciation charged on the year 2017-18 
80,000 *15%* 12/1212,000
Amount of Depreciation charged on the year 2018-19 
80,000 *15%* 9/129,000
Book value of the asset as of 1st Oct 201838,000
Sale Price of Machinery 40,000
Profit on the sale of the asset2,000

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

Comment if you have any question.

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D K Goel – New ISC Accountancy -(Class 11 – ICSE)- Solution

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