TS Grewal accountancy class 11 solution chapter 14 depreciation

 Class 11th | Chapter-14 | Depreciation | 2023-2024 | Ts Grewal Solution

Question 1:

Calculate annual depreciation and rate of depreciation under Straight Line Method in each of the alternative cases:

Case	Purchase of Machinery	Installation Charges	Estimated Scrap Value	Estimated Useful Life (In Years)
(a)	1,80,000	20,000	10,000	5
(b)	4,75,000	25,000	50,000	5
(c)	90,000	10,000	20,000	10
(d)	3,40,000	60,000	40,000	10
(e)	90,000	10,000	20,000	4

Answer:

Case	Amount of Annual Depreciation	Rate of Depreciation
	Total Cost of Assets – Scarp value ÷ Useful life	Amount Depreciation × 100 ÷ Total Cost of Assets
1	= (1,80,000+20,000) - 10,000 ÷ 5 = 38,000	38,000×100÷2,00,000 =19%
2	=(4,75,000+25,000) - 50,000 ÷ 5 =90,000	90,000×100÷5,00,000 =18%
3	= (90,000+10,000) - 20,000 ÷ 10 =8,000	8,000×100÷ 1,00,000 = 8%
4	=(3,40,000+60,000) - 40,000 ÷ 10 =36,000	36,000×100÷ 4,00,000 = 9%
5	= (90,000+10,000) - 20,000 ÷ 4 =20,000	20,000×100÷1,00,000 = 20%

 

Question 2:

Ram & Co. purchased machinery for ` 21,000 on 1st April, 2019. The estimated useful life of the machinery is 10 years, after which its realisable value will be `1,000. Determine the amount of annual depreciation according to the Straight Line Method and prepare Machinery Account for the first three years. The books of account are closed on 31st March every year.

 

Answer:

Book of Ram & Com. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2019					2020
April 01		Bank A/c		21,000	Mar.31	Depreciation A/c		2,000
					Mar.31	Balance c/d		19,000
				21,000				21,000
2020					2021
April 01		Balance b/d		19,000	Mar.31	Depreciation A/c		2,000
					Mar.31	Balance c/d		17,000
				19,000				19,000
2021					2022
April 01		Balance b/d		17,000	Mar.31	Depreciation A/c		2,000
					Mar.31	Balance c/d		15,000
				17,000				17,000

Question 3:

Calculate the Amount of annual Depreciation and Rate of Depreciation under Straight Line Method (SLM) from the following:
Purchased a second-hand machine for  ` 96,000, spent  ` 24,000 on its cartage, repairs and installation, estimated useful life of machine 4 years. Estimated residual value  ` 72,000.

Answer:

Amount of Annual Depreciation=Cost of Machine−Scrap Value of Machine Life in Years                                       

   =1,20,000−72,000/4=Rs 12,000

     Rate of Depreciation=Amount of DepreciationCost of Machine×100                                  

              =12,000/1,20,000×100=10%p.a.

Question 4:

1st April, 2019, X Ltd. purchased a machine costing `4,00,000 and spent  ` 50,000 on its installation. The estimated life of the machinery is 10 years, after which its residual value will be ` 50,000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare Machinery Account for the first three years. The books are closed on 31st March every year.

Answer:

Book of X Ltd. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2019					2020
April 01		Bank
		on Expense)		50,000	4,00,000 Mar.31 Depreciation   40,000 April 01 Bank (Erecti	Balance c/d		4,10,000
				4,50,000				4,50,000
2020					2021
April 01		Balance b/d		4,10,000	Mar.31	Depreciation		40,000
						Balance c/d		3,70,000
				4,10,000				4,10,000
2021					2022
April 01		Balance b/d		3,70,000	Mar.31	Depreciation		40,000
						Balance c/d		3,30,000
				3,70,000				3,70,000

Calculation of Depreciation:

Depreciation p.a.=4,00,000+50,000-50,000(Scrap Value)10 years                     

    = ` 40,000 p.a.

Question 5:

On 1st April, 2018, furniture costing  ` 55,000 was purchased. It is estimated that its life is 10 years at the end of which it will be sold for  ` 5,000. Additions are made on 1st April 2019 and 1st October, 2021 to the value of  ` 9,500 and  ` 8,400 (Residual values  ` 500 and  ` 400 respectively). Show the Furniture Account for the first four years, if Depreciation is written off according to the Straight Line Method.

Answer:

Furniture Account
Dr.											Cr.
Date		Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
2018						2019
April 01		Bank (F1)			55,000	March 31	Depreciation (F1)			5,000
						March 31	Balance c/d (F1)			50,000
					55,000					55,000
2019						2020
April 01		Balance b/d (F1)			50,000	March 31	Depreciation
April 01		Bank (F2)			9,500		F1	5,000
							F2	900		5,900
						March 31	Balance c/d
							F1	45,000
							F2	8,600		53,600
					59,500					59,500
2020						2021
April 01		Balance b/d				March 31	Depreciation
		F1	45,000				F1	5,000
		F2	8,600		53,600		F2	900		5,900
						March 31	Balance c/d
							F1	40,000
							F2	7,700		47,700
					53,600					53,600
2021						2022
April 01		Balance b/d				March 31	Depreciation
		F1	40,000				F1	5,000
		F2	7,700		47,700		F2	900
Oct. 01		Bank (F3)			8,400		F3	400		6,300
						March 31	Balance c/d
							F1	35,000
							F2	6,800
							F3	8,000		49,800
					56,100					56,100

Working Notes:

Drepreciation on Furniture 1=55,000-5,000(Scrap Value)/10 Year=  `5,000 p.a.

Drepreciation on Furniture 2=9,500-500(Scrap Value)/10 Year=  `900 p.a.

Drepreciation on Furniture 3=8,400-400(Scrap Value)/10 Year=  `800 p.a.

Depreciation on Furniture(for 6 Month)=800×6/12= `400

 

Question 6:

From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2022:

1st April, 2021	:	Purchased a second-hand machinery for  ` 40,000
1st April, 2021	:	Spent  ` 10,000 on repairs for making it serviceable.
30th September, 2021	:	Purchased additional new machinery for  ` 20,000.
31st December, 2021	:	Repairs and renewal of machinery  ` 3,000.
31st March, 2022	:	Depreciate the machinery at 10% p.a.

Answer:

Answer:

Machinery Account
Dr.											Cr.
Date		Particulars	J.F.	( `)	Date	Particular			J.F.	( `)
2021					2022
Apr.01		Bank (M1)		50,000	Mar.31	Depreciation
Sept 30		Bank (M2)		20,000		M1		5,000
						M2 (6 months)		1,000		6,000
					Mar.31	Balance c/d
						M1	45,000
						M2 (6 months)	19,000			64,000
				70,000						70,000

Note: 

Repair and renewal made on December 31, 2021 will not be recorded in Machinery Account because, this repair was made after putting the Machinery into use.

Question 7:

An asset was purchased for  ` 10,500 on 1st April, 2014. The scrap value was estimated to to be  ` 500 at the end of asset's 10 years' life. Straight Line Method of depreciation was used. The accounting year ends on 31st March every year. The asset was sold for  ` 600 on 31st March, 2021. Calculate the following.
(i) The Depreciation expense for the year ended 31st March, 2015.
(ii) The net book value of the asset on 31st March, 2019.
(iii) The gain or loss on sale of the asset on 31st March, 2021.

Answer:

Asset Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2014					2015
April 01		Bank		10,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		9,500
				10,500				10,500
2015					2016
April 01		Balance b/d		9,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		8,500
				9,500				9,500
2016					2017
April 01		Balance b/d		8,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		7,500
				8,500				8,500
2017					2018
April 01		Balance b/d		7,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		6,500
				7,500				7,500
2018					2019
April 01		Balance b/d		6,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		5,500
				6,500				6,500
2019					2020
April 01		Balance b/d		5,500	Mar.31	Depreciation		1,000
					Mar.31	Balance c/d		4,500
				5,500				5,500
2021					2022
April 01		Balance b/d		4,500	Mar.31	Depreciation		1,000
					Mar.31	Bank		600
					Mar.31	Profit and Loss (Loss)		2,900
				4,500

(i) Depreciation Expense for the year ended March 31, 2015 is Rs 1000

(ii) The Net Book Value of the asset on March 31, 2019 is Rs 5,500

(iii) Loss on Sale of the asset on March 31, 2022 is Rs 2,900

Question 9:

On 1st April, 2018, A Ltd. purchased a machine for  ` 2,40,000 and spent  ` 10,000 on its erection. On 1st October, 2018 an additional machinery costing  ` 1,00,000 was purchased. On 1st October, 2020, the machine purchased on 1st April, 2018 was sold for  ` 1,43,000 and on the same date, a new machine was purchased at cost of  ` 2,00,000.
Show the Machinery Account for the first four financial years after charging Depreciation at 5% p.a. by the Straight Line Method.

Answer:

Machinery Account

Dr.												Cr.
Date		Particulars		J.F.	( `)	Date	Particulars			J.F.	( `)
2018						2019
April 01		Bank (M1)			2,50,000	March 31	Depreciation
Oct. 01		Bank (M2)			1,00,000		M1	12,500
							M2 (6 Months)	2,500			15,000
						March 31	Balance c/d
							M1	2,37,500
							M2	97,500			3,35,000
					3,50,000						3,50,000
2019						2020
April 01		Balance b/d				March 31	Depreciation
		M1	2,37,500				M1		12,500
		M2	97,500		3,35,000		M2		5,000		17,500
						March 31	Balance c/d
							M1	2,25,000
							M2	92,500			3,17,500
					3,35,000						3,35,000
2020						2020
April 01		Balance b/d				Oct. 01	Depreciation (for 6 months)				6,250
		M1	2,25,000			Oct. 01	Bank (M1 sold)				1,43,000
		M2	92,500		3,17,500	Oct. 01	Profit and Loss (loss on sale)				75,750
						2021
July 01		Bank (M3)			2,00,000	March 31	Depreciation
							M2	5,000
							M3 (for 6 months)	5,000			10,000
						March 31	Balance c/d
							M2	87,500
							M3	1,95,000			2,82,500
					5,17,500						5,17,500
2021						2022
April 01		Balance b/d				March 31	Depreciation
		M2	87,500				M2	5,000
		M3	1,95,000		2,82,500		M3	10,000			15,000
						March 31	Balance c/d
							M2	82,500
							M3	1,85,000			2,67,500
					2,82,500						2,82,500

 

Working Notes:

1. Calculation of Deprecation  

Machine 1= 2,50,000×5/100=  `12,500 p.a.

Machine 2= 1,00,000×5/100=  `5,000 p.a.

Machine 3= 2,00,000×4/100=  `10,000 p.a.

 

2. Calculation of profit or loss on sale of Machine

Particulars	( `)
Book Value on April 01, 2020	2,25,000
Less: Deprecation for six month	(6,250)
Book Value on Oct. 01, 2021	2,18,750
Less: Sale Proceeds	(1,43,000)
Loss on Sale of Machine	75,750

Question 10:

A Van was purchased on 1st April, 2019 for `60,000 and  ` 5,000 was spent on its repair and registration. On 1st October, 2020 another van was purchased for `70,000. On 1st April, 2021, the first van purchased on 1st April, 2019 was sold for `45,000 and a new van costing `1,70,000 was purchased on the same date. Show the Van Account from 2019-20 to 2021-22 on the basis of Straight Line Method, if the rate of Depreciation charged is 10% p.a. Assume that books are closed on 31st March every year.

Answer:

Van Account
Dr.												Cr.
Date		Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
2019						2020
April 01		Bank A/c (I)			65,000	March 31	Depreciation A/c (I)			6,500
						March 31	Balance c/d (I)			58,500
					65,000					65,000
2020						2021
April 01		Balance b/d (I)			58,500	March 31	Depreciation A/c
Oct. 01		Bank A/c (II)			70,000		(I)	6,500
							(II) (for 6 month)	3,500		10,000
						March 31	Balance c/d
							(I)	52,000
							(II)	66,500		1,18,500
					1,28,500					1,28,500
2021						2021
April 01		Balance b/d				April 01	Bank A/c (I)			45,000
		(I)	52,000			April 01	Profit and Loss A/c (Loss on Sale)			7,000
						2022
		(II)	66,500		1,18,500	March 31	Depreciation A/c
April 01		Bank A/c (III)			1,70,000		(II)	7,000
							(III)	17,000		24,000
						March 31	Balance c/d
							(II)	59,500
							(III)	1,53,000		2,12,500
					2,88,500					2,88,500

Working Notes

1. Calculation of Annual Depreciation

Maruti  Van (1) = 65,000×10/100=  `6,500

Maruti  Van (1I) = 70,000×10/100=  `7,000

Maruti  Van (1II) =1,70,000×10/100=  `17,000

2. Calculation of profit or loss on sale of Van (I)

 

Particulars	( `)
Book Value on Apr. 01, 2021	52,000
Less: Sale of Van	(45,000)
Loss on Sale of Van	7,000

 

Question 11:

A company whose accounting year is a financial year, purchased on 1st July, 2019 machinery costing  ` 30,000.
It purchased further machinery on 1st January, 2020 costing  ` 20,000 and on 1st October, 2020 costing  ` 10,000.
On 1st April, 2021, one-third of the machinery installed on 1st July, 2019 became obsolete and was sold for  ` 3,000.
Show how Machinery Account would appear in the books of the company. It being given that machinery was depreciated by Fixed Instalment Method at 10% p.a. What would be the value of Machinery Account on 1st April, 2022?

Answer:

Date	Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
2019					2020
July 01	Bank (I)			30,000	March 31	Depreciation
2019						I (for 9 months)	2,250
Jan. 01	Bank (II)			20,000		II	500		2,750
					March 31	Balanced c/d
						I	27,750
						II	19,500		47,250
				50,000					50,000
2020					2021
April 01	Balance b/d				March 31	Depreciation
	I	27,750				I	3,000
	II	19,500		47,250		II	2,000
						III	500		5,500
Oct. 01	Bank (III)			10,000	March 31	Balance c/d
						I	24,750
						II	17,500
						III	9,500		51,750
				57,250					57,250
2021	Balance b/d				2021
April 01	I	24,750			April 01	Bank I(1/3rd portion)			3,000
	II	17,500			April 01	Profit and Loss (Loss on Sale of I)			5,250
	III	9,500		51,750	2022
					March 31	Depreciation
						I (on 2/3rd portion)	2,000
						II	2,000
						III	1,000		5,000
					March 31	Balance c/d
						I (on 2/3rd portion)	14,500
						II	15,500
						III	8,500		38,500
				51,750					51,750

Working Notes

1. Calculation of Depreciation

Machine 1=30,000×10/100= ` 3,000

And Drepreciation of  2/3rd proportion=3,000×2/3= `2,000

Machine II =20,000×10/100=  ` 2,000p.a.

Machine III =10,000×10/100=  ` 1,000p.a.

 

Calculation of profit or loss on sale of 1/3rd Portion of Machine I

Particulars	( `)
Book Value of 1/3rd portion of Machine I on April 01, 2021 (24,750 × 1/3)	8,250
Less: Sale Value	(3,000)
Loss on sale	5,250

 

Question 13:

On 1st July, 2017, A Co. Ltd. purchases second-hand machinery for  ` 20,000 and spends  ` 3,000 on reconditioning and installing it. On 1st January, 2018, the firm purchases new machinery worth  ` 12,000. On 30th June, 2019, the machinery purchased on 1st January, 2016, was sold for  ` 8,000 and on 1st July, 2019, a fresh plant was installed.
Payments for this plant was to be made as follows:

1st July, 2019	` 5,000
30th June, 2020	` 6,000
30th June, 2021	` 5,500

Payments in 2020 and 2021 include interest of  ` 1,000 and  ` 500 respectively.
The company writes off 10% p.a. on the original cost. The accounts are closed every year on 31st March. Show the Machinery Account for the year ended 31st March, 2020.

Answer:

Books of A. Co. Ltd Machinery A/c
Date	Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
					2018
2017					Mar.31	Depreciation
July 01	Bank (I) (20,000 + 3,000)			23,000		I (for 9 months)	1,725
2017						II (for 3 months)	300		2,025
Jan.01	Bank (II)			12,000	Mar.31	Balance c/d
						I	21,275
						II	11,700		32,975
				35,000					35,000
2018 April 01	Balance b/d				2019
	I	21,275			Mar.31	Depreciation
	II	11,700		32,975		I	2,300
						II	1,200		3,500
					Mar.31	Balance c/d
						I	18,975
						II	10,500		29,475
				32,975					32,975
2019					2019
April 01	Balance b/d				June 30	Bank (II)			8,000
	I	18,975			June 30	Depreciation (II) (for 3 months)			300
	II	10,500		29,475	June 30	Profit and Loss (Loss)			2,200
July 01	Bank (III)			5,000	2020
July 01	Creditors for plant (III)			10,000	Mar.31	Depreciation
						I	2,300
						III (on 15,000 for 8 months)	1,125		3,425
						Balance c/d
						I	16,675
						III	13,875		30,550
				44,475					44,475

Working Notes

1. Calculation of Depreciation

Machine I= 23,000×10/100=  ` 2,300 p.a.

Machine II=12,000×10/100=  ` 1,200 p.a.

Machine III=15,000×10/100=  ` 1,500 p.a.

 

2.     Calculation of profit on loss on sale of Machine (II)

 

Particulars	(Rs)
Book Value of Machine (II) on April 01, 2017	10,500
Less: Depreciation for 3 Months	(300)
Book Value on June 30	10,200
Less: Sale	(8,000)
Loss on Sale	2,200

Question 14:

Following balances appear in the books of Hari Bros:

		`
1st April, 2020	Machinery A/c	80,000
	Provision for Depreciation A/c	36,000

On 1st April, 2020, they decided to sell a machine for  ` 8,700. This machine was purchased for  ` 16,000 in April, 2016. Prepare the Provision for Depreciation Account and Machinery Account on 31st March, 2021, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line Method.

Answer:

Books of Rama Bros. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
Apr.01		Balance b/d (64,000 + 16,000)		80,000	Apr.01	Provision for Depreciation		6,400
					Apr.01	Bank		8,700
					Apr.01	Profit and Loss		900
					2021
					Mar.31	Balance c/d		64,000
				80,000				80,000

 

Provision for Depreciation Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
Apr.01		Machinery Account (Accumulated Dep. on Machine Sold)		6,400	Apr.01	Balance b/d		36,000
2021 Mar.31		Balance c/d		36,000	2021 Mar.31	Depreciation (on 64,000 @10%)		6,400
				42,400				42,400

 

Working Notes

(1) Calculation of Book Value of Machine Sold on April 01, 2020

Particulars	( `)
Machine purchased in 2016	16,000
Less: Accumulate Depreciation for 4 years till Mar 31, 2020 (1,600 × 4)	(6,400)
Book value on April 01, 2020	9,600

 

(2)Calculation of profit or loss on Sale of Machine

Particulars	( `)
Book Value on April 01, 2020	9,600
Less: Sale Value	(8,700)
Loss on Sale of Machine	900

 

Question 15:

Following balances appear in the books of Priyank Brothers:

		`
1st April, 2020	Machinery A/c	20,00,000
	Provision for Depreciation A/c	8,00,000

On 1st April, 2020, they decide to sell a machine for ` 5,00,000. This machine was purchased for `7,50,000 on 1st April, 2017. Prepare the Machinery Account and Provision for Depreciation Account for the year ended 31st March, 2021 assuming that the firm has been charging Depreciation @ 10% p.a. on the Straight Line Method.

Answer:

Books of Priyank Brothers Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
April 01		Balance b/d		20,00,000	April 01	Provision for Depreciation		2,25,000
					April 01	Bank		5,00,000
					April 01	Profit and Loss (Loss)		25,000
					2021
					Mar.31	Balance c/d		12,50,000
				20,00,000				20,00,000

 

Provision for Depreciation Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
April 01		Machinery		2,25,000	April 01	Balance b/d		8,00,000
2021					2021
Mar.31		Balance c/d		7,00,000	Mar.31	Depreciation (for the year)		1,25,000
				9,25,000				9,25,000

 

Working Notes

1 Calculation of Loss on Sale of Machinery

Particulars	( `)
Original cost of Machine Sold	7,50,000
Less: Accumulated Depreciation on Machine Sold,  for 3 years, (7,50,000 × 10%  × 3 years)	(2,25,000)
Book Value of Machine Sold	5,25,000
Less: Sale Value	(5,00,000)
Loss on Sale of Machine	25,000

 

Question 16:

A boiler was purchased from abroad for `10,000. Shipping and forwarding charges ` 2,000, Import duty  ` 7,000 and expenses of installation amounted to  ` 1,000.
Calculate the Depreciation for the first three years (separately for each year) @ 10% p.a. on Diminishing Balance Method.

Answer:

Boiler Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
I year					I year
Jan.01		Bank (10,000 + 2,000 + 7,000 + 1,000)		20,000	Dec.31	Depreciation		2,000
						Balance c/d		18,000
				20,000				20,000
II year					II year
Jan.01		Balance b/d		18,000	Dec.31	Depreciation		1,800
					Dec.31	Balance c/d		16,200
				18,000				18,000
III year					III year
Jan.01		Balance b/d		16,200	Dec.31	Depreciation		1,620
					Dec.31	Balance c/d		14,580
				16,200				16,200

Question 17:

The original cost of furniture amounted to `4,000 and it is decided to write off 5% on the original cost as Depreciation at the end of each year. Show the Ledger Account as it will appear during the first four years. Show also how the same account will appear if it was decided to write off 5% p.a. on the diminishing balance of the asset each year.

Answer:

Furniture Account (Original Cost Method)
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
I year					I year
Jan.01		Bank		4,000	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,800
				4,000				4,000
II year					II year
Jan.01		Balance b/d		3,800	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,600
				3,800				3,800
III year					III year
Jan.01		Balance b/d		3,600	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,400
				3,600				3,600
IV year					IV year
Jan.01		Balance b/d		3,400	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,200
				3,400				3,400

Note: Depreciation 4,000×5/100=  ` 200 p.a.

 

Furniture Account (Diminishing Balance Method)
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
I year					I year
Jan.01		Bank		4,000	Dec.31	Depreciation		200
					Dec.31	Balance c/d		3,800
				4,000				4,000
II year					II year
Jan.01		Balance b/d		3,800	Dec.31	Depreciation		190
					Dec.31	Balance c/d		3,610
				3,800				3,800
III year					III year
Jan.01		Balance b/d		3,610	Dec.31	Depreciation		181
					Dec.31	Balance c/d		3,429
				3,610				3,610
IV year					IV year
Jan.01		Balance b/d		3,429	Dec.31	Depreciation		171
					Dec.31	Balance c/d		3,258
				3,429				3,429

Note: Depreciation is calculated on opening balance every year By using below formula

Annual Depreciation = Opening Balance ×5/100

Question 18:

Babu purchased on 1st April, 2020, a machine for  ` 6,000. On 1st October, 2020, he also purchased another machine for  ` 5,000. On 1st October, 2021, he sold the machine purchased on 1st April, 2020 for  ` 4,000.
It was decided that Depreciation @ 10% p.a. was to be written off every year under Diminishing Balance Method.
Assuming the accounts were closed on 31st March every year, show the Machinery Account for the years ended 31st March, 2021 and 2022.

Answer:

Books of Babu Machinery Account
Dr.											Cr.
Date		Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
2020						2021
Apr. 01		Bank (I)			6,000	Mar. 31	Depreciation
Oct. 01		Bank (II)			5,000		I	600
							II (for 6 months)	250		850
						Mar. 31	Balance c/d
							I	5,400
							II	4,750		10,150
					11,000					11,000
2021						2021
Apr. 01		Balance b/d				Oct. 01	Depreciation (I) (for 6 months)			270
		I	5,400			Oct. 01	Bank (I)			4,000
		II	4,750		10,150	Oct. 01	Profit and Loss (Loss)			1,130
						2022
						Mar. 31	Depreciation (II)			475
						Mar. 31	Balance c/d (II)			4,275
					10,150					10,150

Working Note 

(1) Calculation of profit or loss on sale of machine: 

 

Particulars	( `)
Book Value of Machinery Apr. 01, 2021	5,400
Less: Depreciation (for 6 Months)	(270)
Book Value of Machinery on Oct. 01 2021	5,130
Less: Sale	(4,000)
Loss on Sale	1,130

 

 

Question 20:

A company purchased a machinery for  ` 50,000 on 1st October, 2019. Another machinery costing  ` 10,000 was purchased on 1st December, 2020. On 31st March, 2022, the machinery purchased in 2019 was sold at a loss of  ` 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.

Answer:

Machinery Account
Dr.													Cr.
Date		Particulars		J.F.	( `)	Date	Particulars				J.F.	( `)
2019						2020
Oct.01		Bank (I)			50,000	Mar.31	Depreciation (for 6 Months)					3,750
						Mar.31	Balance c/d					46,250
					50,000							50,000
2020						2021
Apr.01		Balance b/d (I)			46,250	Mar.31	Depreciation
Dec.01		Bank (II)			10,000		I		6,938
							II		500			7,438
						Mar.31	Balance c/d
							I	39,312
							II	9,500				48,812
					56,250							56,250
2021						2022
Apr.01		Balance b/d				Mar.31	Depreciation
		I	39,312				I			5,897
		II	9,500		48,812		II			1,425		7,322
						Mar.31	Bank (I)					28,415
						Mar.31	Profit and Loss (Loss)					5,000
						Mar.31	Balance c/d (II)					8,075
					48,812							48,812

Working Note

(1) Calculation of profit or loss on sale of machine:

 

Particulars	( `)
Book Value of Machine I on Apr. 01, 2021	39,312
Less: Depreciation (39,312 × 15%)	5,897
Book Value of Machine I on Mar. 31, 2022	33,415
Less: Sale Value	(28,415)
Loss on Sale of Machine I	5,000

Question 21:

On 1st April, 2019, a machinery was purchased for  ` 20,000. On 1st October, 2020 another machine was purchased for  ` 10,000 and on 1st April, 2021, one more machine was purchased for  ` 5,000. The firm depreciates its machinery @ 10% p.a. on the Diminishing Balance Method.

What is the amount of Depreciation for the years ended 31st March, 2020, 2021 and 2022? What will be the balance in Machinery Account as on 31st March, 2022?

Answer:

I. Calculation of Depreciation from April 01, 2019 to March 31, 2022

Depreciation Rate: 10% p.a. on Diminishing Balance Method

Year	Machinery	Date of Purchase	Value	No. of Months	Amt. of Dep.	Total Dep.
March 31, 2020	M1	April 01, 2019	20,000	12	2,000	2,000
March 31, 2021	M1	April 01, 2019	18,000 (20,000 – 2,000)	12	1,800
	M2	Oct. 01,2020	10,000	6	500	2,300
March 31, 2022	M1	April 01, 2021	16,200 (18,000 – 1,800)	12	1,620
	M2	Oct. 01,2020	9,500	12	950
	M3	April 01, 2021	5,000	12	500	3,070

 

II. Balance in Machinery Account as on March 31, 2022 will be Rs. 27,630

Working Notes: Preparation of Machinery Account

Machinery Account
Dr.						Cr.
Date	Particulars			( `)	Date		Particulars						( `)
2019					2020
April 01	Bank A/c (M1)			20,000	March 31		Depreciation A/c (M1)						2,000
					March 31		Balance c/d (M1)						18,000
				20,000									20,000
2020					2021
April 01	Balance b/d (M1)			18,000	March 31		Depreciation A/c
Oct. 01	Bank A/c (M2)			10,000			M1(10,000×10×6/100/12)			*1,800
							M2			500			2,300
					March 31		Balance c/d
							M1			16,200
							M2			9,500			25,700
				28,000									28,000
2021					2022
April 01	Balance b/d				March 31		Depreciation A/c
	M1		16,200				M1				1,620
	M2		9,500	25,700			M2				950
April 01	Bank A/c (M3)			5,000			M3				500		3,070
					March 31		Balance c/d
							M1			14,580
							M2			8,550
							M3			4,500			27,630
				30,700									30,700

Note: Since the question does not specify to prepare the Machinery Account, thus, it is optional to prepare this account.

Question 24:

A company purchased on 1st July, 2015 machinery costing  ` 30,000. It further purchased machinery on 1st January, 2016 costing  ` 20,000 and on 1st October, 2016 costing  ` 10,000. On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for  ` 3,000. The company follows financial year as accounting year.
Show how the Machinery Account would appear in the books of company if depreciation is charged @ 10% p.a. on Written Down Value Method.

Answer:

Machinery Account
Dr.													Cr.
Date		Particulars			J.F.	(Rs)	Date	Particulars			J.F.	(Rs)
2018							2019
July 01		Bank					Mar.31	Depreciation
		I(2/3)		20,000				I(2/3)		1,500
2019		I(1/3)		10,000		30,000		I(1/3)		750
Jan.01		Bank (II)				20,000		II		500		2,750
							Mar.31	Balance c/d
								I(2/3)		18,500
								I(1/3)		9,250
								II		19,500		47,250
						50,000						50,000
2019							2020
Apr 01		Balance b/d					Mar 31	Depreciation
		I(2/3)	18,500					I(2/3)	1,850
		I(1/3)	9,250					I(1/3)	925
		II	19,500			47,250		II	1,950
Oct 01		Bank (III)				10,000		III	500			5,225
							Mar 31	Balance c/d
								I(2/3)	16,650
								I(1/3)	8,325
								II	17,550
								III	9,500			52,025
						57,250						57,250
2020							2020
Apr.01		Balance b/d					Apr.01	Bank (I)(1/3)				3,000
		I(2/3)	16,650				Apr.01	Profit and Loss (Loss)				5,325
		I(1/3)	8,325				Mar.31,	Depreciation
		II	17,550				2021	I(2/3)	1,665
		III	9,500			52,025		II	1,755
								III	950			4,370
							Mar.31	Balance c/d
								I(2/3)	14,985
								II	15,795
								III	8,550			39,330
						52,025						52,025

 

Working Note:

(1) Calculation of Profit or Loss on Sale of Plant I(1/3):

Particulars	(Rs)
Book Value of Plant I (1/3) as on Apr 01, 2020	8,325
Less: Sale Value	(3,000)
Loss on Sale	5,325

Question 25:

Following balances appear in the books of M/s. Amrit as on 1st April, 2020:

		`
2020
1st April	Machinery A/c	60,000
	Provision for Depreciation A/c	36,000

On 1st April, 2020, they decided to dispose off a machinery for  ` 8,400 which was purchased on 1st April, 2016 for  ` 16,000.
You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ended 31st March, 2021. Depreciation was charged at 10% p.a on Cost following Straight Line Method.

Answer:

Books of M/s. Amrit Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
April 01		Balance b/d (44,000 + 16,000)		60,000	April 01	Machinery Disposal		16,000
					2021
					Mar.31	Balance c/d		44,000
				60,000				60,000

 

Provision for Depreciation Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
April 01		Machinery Disposal (4 years)		6,400	April 01	Balance b/d		36,000
2021					2021
Mar.31		Balance c/d		34,000	Mar.31	Depreciation (on Machine costing Rs 44,000)		4,400
				40,400				40,000

 

Machinery Disposal Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2020					2020
April 01		Machinery		16,000	April 01	Provision for Depreciation		6,400
					2021
					Mar.31	Bank (Sale)		8,400
						Profit and Loss (Loss)		1,200
				16,000				16,000

Working Note

1. Calculation of profit or loss on Machine Sold:

Particulars	( `)
Original Cost of Machine Sold on April 01, 2020	16,000
Less: Accumulated Depreciation on Machine Sold (1,600 × 4)	(6,400)
Book Value of April 01, 2020	9,600
Less: Sale Value	(8,400)
Loss on Sale	1,200

 

Question 26:

Ashoka & Co. whose books are closed on 31st March, purchased a machinery for  ` 1,50,000 on 1st April, 2019, Additional machinery was acquired for  ` 50,000 on 1st October, 2019. Certain machinery which was purchased for  ` 50,000 on 1st October, 2019 was sold for  ` 40,000 on 30th September, 2021.

Prepare the Machinery Account and Accumulated Depreciation Account for all the years up to the year ended 31st March, 2022. Depreciation is charged @ 10% p.a. on Straight Line Method. Also, show the Machinery Disposal Account.

Answer:

Books of Ashoka & Co. Machinery Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2019					2020
Apr.01		Bank (I)		1,50,000
Oct 01		Bank (II)		50,000	Mar.31	Balance c/d		2,00,000
				2,00,000				2,00,000
2020					2021
Apr.01		Balance b/d		2,00,000	Mar.31	Balance c/d		2,00,000
				2,00,000				2,00,000
2021					2021
Apr.01		Balance b/d		2,00,000	Sep 30	Machinery Disposal A/c		50,000
					2022 Mar.31,	Balance c/d		1,50,000
				2,00,000				2,00,000

 

Accumulated Depreciation Account
Dr.												Cr.
Date		Particulars			J.F.	( `)	Date	Particulars		J.F.	( `)
2020							2019
Mar.31		Balance c/d					Mar. 31	Depreciation
		I		15,000				I	15,000
		II		2,500		17,500		II (for 6 months)	2,500		17,500
						17,500					17,500
2021							2020
Mar.31		Balance c/d					Apr. 01	Balance b/d
		I	30,000					I	15,000
		II	7,500			37,500	2021	II	2,500		17,500
							Mar. 31	Depreciation
								I	15,000
								II	5,000		20,000
						37,500					37,500
2021							2021
Sep 30		Machinery disposal (II)				10,000	Apr. 01	Balance b/d
Mar.31, 2022		Balance c/d (I)				45,000		I	30,000
								II	7,500		37,500
							2021 Sep 30	Depreciation (II)			2,500
							Mar. 31	Depreciation (I)			15,000
						55,000					55,000

 

Machinery Disposal Account
Dr.									Cr.
Date		Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2021					2021
Sep 30		Machinery A/c		50,000	Sep 30	Accumulated Depreciation A/c		10,000
					Sep 30	Bank A/c		40,000
				50,000				50,000

Working note

        1. Calculation of Profit or Loss on sale of Machine II

 

Particulars	( `)
Original Cost Oct 01, 2021	50,000
Less: Accumulated Depreciation	(10,000)
Book Value on Sept 30, 2021	40,000
Less: Sale Value	(40,000)
Profit / Loss	NIL