Question No 22 Chapter No 12

22. X Ltd. which closes its books of account every year on 31st March, purchased on 1st October, 2011 machinery costing 4,40,000. It purchased further machinery on 1st April, 2012 costing 5,20,000. On 30th June, 2013, the first machine was sold for 2,50,000 and on the same date a fresh machine was installed at a cost of 3,00,000. On 1st July 2014, the second machine purchased on 1st April 2012 was also sold for 3,25,000.
The company writes off depreciation at 10% p.a. on the Straight Line Method each year. Show the Machinery A/c, Depreciation A/c and Provision for Depreciation A/c for all the four years.

## The solution of Question No 22 Chapter No 12: –

 Dr. Machinery A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 1st Oct.2011 To Bank A/c 4,40,000 31st Mar 2012 By Balance C/d 4,40,000 4,40,000 4,40,000 1st Apr.2012 To Balance b/f 4,40,000 1st Apr.2012 To Bank A/c 5,20,000 31st Mar 2013 By Balance C/d 9,60,000 9,60,000 9,60,000 1st Apr.2013 To Balance b/f 9,60,000 1st Jun.2013 By Provision forDepreciation A/c 77,000 30stJun.2013 To Bank A/c 3,00,000 1st Jun.2013 By Bank A/c (Sale) 2,50,000 1st Jun.2013 By Profit & Loss A/c 1,13,000 31st Mar 2014 By Balance C/d(5,20,000 + 3,00,000) 8,20,000 12,60,000 12,60,000 1st Apr.2013 To Balance b/f 8,20,000 1st Jul.2014 By Provision forDepreciation A/c 1,17,000 1st Jul.2014 By Bank A/c (Sale) 3,25,000 1st Jul.2014 By Profit & Loss A/c 78,000 31st Mar 2015 By Balance C/d(1,60,000 + 2,00,000) 3,60,000 8,20,000 8,20,000
 Dr. Depreciation A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 31stMar2012 To Provision for Depreciation A/c 22,000 31st Mar 20112 By Profit & Loss A/c 22,000 22,000 22,000 31stMar.2013 To Provision for Depreciation A/c 96,000 31st Mar 2013 By Profit & Loss A/c 96,000 96,000 96,000 1st Apr.2014 To Provision for Depreciation A/c 85,500 31st Mar 2014 By Profit & Loss A/c 85,500 85,500 85,500 1st Apr.2015 To Balance b/f 43,000 31st Mar 2025 By Profit & Loss A/c 43,000 43,000 43,000
 Dr. Provision for Depreciation  A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 31st Mar.2012 By Depreciation A/c (9,000 + 9,000 + 18,000) 22,000 31stMar.2012 Balance c/d 22,000 22,000 22,000 31st Apr 2012 By Balance b/d 22,000 31stMar.2013 Balance c/d 1,18,000 31st Mar 2013 By Depreciation A/c (44,000 + 52,000) 96,000 1,18,000 1,18,000 1st Jan.2013 To Balance b/f(22,000 + 44,000 + 11,000) 77,000 31st Apr 2013 By Balance b/d 84,000 1st Jan.2013 By Depreciation A/c (3 Months) 11,000 1st Apr.2014 To Balance b/f 1,26,500 31st Mar.2014 By Depreciation A/c (12,000 + 24,000) 74,500 2,03,500 2,03,500 1st Jan.2014 To Machinery A/c(52,000 + 52,000 + 13,000) 1,17,000 31st Apr 2014 By Balance b/d 1,26,500 31st Mar.2015 By Depreciation A/c93 months) 13,000 1st Apr.2015 To Balance b/f 52,500 31st Mar.2015 By Depreciation A/c(24,000 + 7,500) 30,000 1,69,500 1,69,500

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 Oct. 2011 4,40,000 Less: – Amount of Depreciation charged on the year 2011-12 4,40,000 *10%* 6/12 22,000 Amount of Depreciation charged on the year 2012-13 4,40,000 *10%* 6/12 44,000 Amount of Depreciation charged on the year 2013-14 4,40,000 *10%* 3/12 11,000 Book value of the asset as of 1st Oct 2018 3,63,000 Sale Price of Machinery 2,50,000 Loss on the sale of the asset 1,13,000

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 Apr. 2012 5,20,000 Less: – Amount of Depreciation charged on the year 2012-13 5,20,0000 *10%* 12/12 52,000 Amount of Depreciation charged on the year 2013-14 5,20,0000 *10%* 12/12 52,000 Amount of Depreciation charged on the year 2014-15 5,20,000 *10%* 3/12 13,000 Book value of asset as of 30st Jun 2014 4,03,000 Sale Price of Machinery 3,25,000 Loss on the sale of the asset 78,000

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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