Question No 42 Chapter No 13

Creation of Provision for Depreciation Account

42. The following balance appears in the books of Rohit Thakur

 April.1 2018 Machinery Account 4,00,000 Provision for Depreciation 1,20,000

On April 1, 2018, Rohit Thakur sold machinery for Rs 44,000 which was purchased on 1st April 2015 for Rs 90,000
Prepare Machinery Account, Provision for Depreciation and Machinery Disposal Account for the years 2018-19, assuming 10% p.a. depreciation on Straight-line method.

The solution of Question No 42 Chapter No 13:-

 Dr. Machinery A/c Cr. Dat Particulars J.F. Amount Date Particulars J.F. Amount 01/04/18 To Balance b/f 4,00,000 01/04/19 By Machinery Disposal A/c 90,000 01/04/19 By Balance C/d 4,10,000 4,00,000 4,00,000

 Dr. Provision for Depreciation A/c Cr. Dat Particulars J.F. Amount Date Particulars J.F. Amount 31/03/17 To Machinery Disposal A/c 27,000 01/04/18 By Balance b/f 1,20,000 31/03/19 To Balance c/d 1,24,000 31/03/19 By Depreciation A/c 31,000 1,51,000 1,51,000

 Dr. Machinery Disposal A/c Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount 01/04/18 By Balance b/f 44,000 01/04/18 By Provision for Dep. A/c 27,000 01/04/18 By Profit/Loss A/c 19,000 01/04/18 To Machinery A/c 90,000 90,000 90,000

Note: The answer given in the book is wrong and the correct answer is Rs 19,000 as we have been shown in the above answer.

Working note:-

 Statement Showing profit or loss on the sale of Machinery Particulars Amount Purchase value of Equipment as on 1st Apr, 2015 50,000 Less: – Amount of Depreciation charged on the year 2015-16 90,000 *10%* 12/12 9,000 Amount of Depreciation charged on the year 2016-17 90,000 *10%* 12/12 9,000 Amount of Depreciation charged on the year 2017-18 90,000 *10%* 12/12 9,000 Book value of the asset as on 31st March 2018 63,000 Sale Price of Machinery 44,000 Loss on the sale of the asset 19,000

\

Depreciation | Meaning | Methods | Examples

Comment if you have any question.

Also, Check out the solved question of all Chapters: –

Chapter No. 1 – Introduction

Chapter No. 2 – Theory Base of Accounting

Chapter No. 3 – Vouchers and transactions

Chapter No. 4 – Journal

Chapter No. 5 – Ledger

Chapter No. 6 – Cash Book

Chapter No. 7 – Other Subsidiary Books

Chapter No. 8 – Journal Proper

Chapter No. 9 – Trial Balance

Chapter No. 10 – Bank Reconciliation Statement

Chapter No. 11 – Depreciation

Chapter No. 12 – Provisions and Reserves

Chapter No. 13 – Bills of Exchange

Chapter No. 14 – Rectification of Errors

Chapter No. 15 – Financial Statements – (Without Adjustments)

Chapter No. 16 – Financial Statements – (With Adjustments)