Advertisements
Advertisements
Question
A manufacturing company purchased on 1st April 2010, a plant and machinery for ₹ 4,50,000 and spent ₹ 50,000 on its installation. After having used it for three years, it was sold for ₹ 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed installment method. Accounts are closed on 31st March every year. Calculate profit or loss on sale of machinery.
Solution
Calculation of Profit or Loss on sale of Machinery
| Date | Particulars | ₹ | |
| 01.04.2010 | Plant and machinery purchased | 4,50,000 | |
| 01.04.2010 | Add: Its installation | 50,000 | |
| 01.04.2010 | Original cost | = | 5,00,000 |
| 31.03.2011 | Less: Depreciation @ 15% | = | 75,000 |
| 01.04.2011 | Book Value | = | 4,25,000 |
| 31.03.2012 | Less: Depreciation @ 15% | = | 75,000 |
| 01.04.2012 | Book Value | = | 3,50,000 |
| 31.03.2013 | Less: Depreciation @ 15% | = | 75,000 |
| 01.04.2013 | Book Value | = | 2,75,000 |
Selling price – Book value = Profit
= 3,85,000 – 2,75,000 = 1,10,000
Profit on sale of Machinery is = ₹ 1,10,000.
APPEARS IN
RELATED QUESTIONS
Write the word/term/phrase which can substitute the following statement:
The method of depreciation in which the rate of depreciation is fixed but the amount of depreciation reduces every year.
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount that a fixed asset is expected to realise on its disposal is known as ______
Select the most appropriate answer from the alternatives given below and rewrite the sentence:
The amount of depreciation reduces year after year under ______
Complete the following sentence:
Depreciation Account is a ______ account.
A depreciable asset may suffer obsolescence due to ______.
Distinguish between straight-line method and written down value method of providing depreciation.
A firm purchased a plant for ₹ 40,000. Erection charges amounted to ₹ 2,000. The effective life of the plant is 5 years. Calculate the amount of depreciation per year under the straight-line method.
An asset is purchased on 1.1.2016 for ₹ 50,000. Depreciation is to be provided annually according to the straight-line method. The useful life of the asset is 10 years and its residual value is ₹ 10,000. Accounts are closed on 31st December every year. You are required to find out the rate of depreciation and give journal entries for first two years.
On 1st Jan 2015, Triveni Traders Raigad purchased a Plaint for ₹ 12,000, and installation charges being ₹ 3,000. On 1st July 2016 another Plant was purchased for ₹ 25,000, on 1st April 2017 another Plant was purchased for ₹ 27,000, wages paid for installation amounted to ₹ 2,000. Carriage paid for the Plant amounted to ₹ 1,000. Show Plant Account up to 31st March 2018 assuming that the rate of depreciation is @ 10% p.a. on Straight Line Method.
On 1st April 2015 Farid of Nasik purchased a Motor Car for ₹ 55,000. The scrap value of the Motor Car was estimated at ₹ 10,000 and its estimated life is 10 years The Registration charges of the Motor Car was ₹ 5,000.
Show Motor Car Account for first four years, assuming that the books of accounts are closed on 31st March every year.
