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 | 9,000 | |||||
| 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 |
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Depreciation | Meaning | Methods | Examples
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Also, Check out the solved question of all Chapters: –
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
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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)
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