Q. On 1st April 2015, Star Ltd. purchased 5 machines for 60, 000 each. On 1st April, 2017, one of the machine was sold at a loss of ₹8,000. On 1st July, 2018, second machine was sold at a loss of ₹12,500. A new machine was purchased for ₹1,00,000 on 1st October, 2018.
Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year & depreciation is charged @ 10% per annum as per straight Line Method
Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year & depreciation is charged @ 10% per annum as per straight Line Method
Answers & Comments
Answer:
Solution
Dr.
Machinery A/c
Cr.
Date
Particulars
Amount
(₹)
Date
Particulars
Amount
(₹)
2015
2016
April 01 To Cash/Bank A/c (60,000 × 5)
3,00,000
March 31 By Depreciation A/c (3,00,000 × 10/100)
30,000
March 31 By balance c/d
2,70,000
3,00,000
3,00,000
2016
2017
April 01 To balance b/d
2,70,000
March 31 By Depreciation A/c (3,00,000 × 10/100)
30,000
March 31 By balance c/d
2,40,000
2,70,000
2,70,000
2017
2017
April 01 To balance b/d
2,40,000
April 01 By Bank A/c (WN1)
40,000
April 01 By Profit & Loss A/c (Loss on sale)
8,000
2018
March 31 By Depreciation A/c (2,40,000 × 10/100)
24,000
(On remaining machinery)
March 31 By balance c/d
1,68,000
2,40,000
2,40,000
2018
2018
April 01 To balance c/d
1,68,000
July 1 By Depreciation A/c (6,000 × 3/12)
1,500
Oct.01 To Cash/Bank A/c
1,00,000
July 1 By Bank A/c (WN2)
28,000
July 1 By Profit & Loss A/c (Loss on Sale)
12,500
2019
March 31 By Depreciation A/c (On remaining
23,000
Machinery)
[(1,80,000 × 10/100) +
(1,00,000 × 10/100 × 6/12)]
March 31 By balance c/d
2,03,000
2,68,000
2,68,000
Working Notes:
1) Calculation of Sale proceeds from Machinery sold on 1st April, 2017
Book Value of the Machine as on 1st April, 2017 = (Total opening balance of Machinery on this date/5)
= ₹ (2,40,000/5) = ₹ 48,000
Loss on Sale of Machinery = ₹ 8,000
Sale proceeds from the Machinery = Book Value of the Machine as on 1st April, 2017 – Loss on Sale
= ₹ (48,000 – 8,000) = ₹ 40,000
2) Calculation of Sale proceeds from Machinery sold on 1st July 2018
Book Value of the Machine as on 1st July, 2018 = [(Total opening balance of Machinery on this date/4) – Depreciation]
= ₹ [(1,68,000/4) – 1,500] = ₹ 40,500
Loss on Sale of Machinery = ₹ 12,500
Sale proceeds from the Machinery = Book Value of the Machine as on 1st July, 2018 – Loss on Sale
= ₹ (40,500 – 12,500) = ₹ 28,000