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Question
Berlia Ltd. Purchased a second-hand machine for ₹ 56,000 on July 01, 2015 and spent ₹ 24,000 on its repair and installation and ₹ 5,000 for its carriage. On September 01, 2016, it purchased another machine for ₹ 2,50,000 and spent ₹ 10,000 on its installation.
(a) Depreciation is provided on machinery @10% p.a. on original cost method annually on December 31. Prepare machinery account and depreciation account from the year 2015 to 2018.
(b) Prepare machinery account and depreciation account from the year 2015 to 2018, if depreciation is provided on machinery @10% p.a. on written down value method annually on December 31.
Solution
(a)
| Dr. | Books of Berlia Ltd. Machinery Account (Original Cost Method) |
Cr. |
|||||
| Date | Particulars | J.F. | Amount ₹ |
Date | Particulars | J.F. | Amount ₹ |
| 2015 | 2015 | ||||||
| Jul.01 | Bank (i) (5,600 + | 85,000 | Dec.31 | Depreciation | 4,250 | ||
| 24,000 + 5,000) | Dec.31 | Balance c/d | 80,750 | ||||
| 85,000 | 85,000 | ||||||
| 2016 | 2016 | ||||||
| Jan.01 | Balance b/d (i) | 80,750 | Dec.31 | Depreciation (i) 8,500, (ii) 8,667 |
17,167 | ||
| Sep.01 | Bank (ii) (2,50,000 + 10,000) |
2,60,000 | Dec.31 | Balance c/d (i) 72,250, (ii) 2,51,333 |
3,23,583 | ||
| 3,40,750 | 3,40,750 | ||||||
| 2017 | 2017 | ||||||
| Jan.01 | Balance b/d (i) 72,250, (ii) 2,51,333 |
3,23,583 | Dec.31 | Depreciation (i) 8,500, (ii) 26,000 |
34,500 | ||
| Dec.31 | Balance c/d (i) 63,750, (ii) 2,25,333 |
2,89,083 | |||||
| 3,23,583 | 3,23,583 | ||||||
| 2018 | 2,89,083 | 2018 | |||||
| Jan.01 | Balance b/d (i) 63,750, (ii) 2,25,333 |
Dec.31 | Depreciation (i) 8,500, (ii) 26,000 |
34,500 | |||
| Dec.31 | Balance c/d (i) 55,250, (ii) 1,99,333 |
2,54,583 | |||||
| 2,89,083 | 2,89,083 | ||||||
| Dr. | Depreciation Account | Cr. | |||||
| Date | Particulars | J.F. | Amount ₹ |
Date | Particulars | J.F. | Amount ₹ |
| 2015 | 2015 | ||||||
| Dec.31 | Machinery | 4,250 | Dec.31 | Profit and Loss | 4,250 | ||
| 4,250 | 4,250 | ||||||
| 2016 | 2016 | ||||||
| Dec.31 | Machinery | 17,167 | Dec.31 | Profit and Loss | 17,167 | ||
| (i) 8,500 (ii) 8,667 | |||||||
| 17,167 | 17,167 | ||||||
| 2017 | 2017 | ||||||
| Dec.31 | Machinery | 34,500 | Dec.31 | Profit and Loss | 34,500 | ||
| (i) 8,500 (ii) 26,000 | |||||||
| 34,500 | 34,500 | ||||||
| 2018 | 2018 | ||||||
| Dec.31 | Machinery | 34,500 | Dec.31 | Profit and Loss | 34,500 | ||
| (i) 8,500 (ii) 26,000 | |||||||
| 34,500 | 34,500 | ||||||
Working notes:
Calculation of annual depreciation
(i) Depreciation (p.a.) on Machinery Purchased on July 01, 2015
= (56,000 + 24,000 + 5,000) × `10/100`
= ₹ 8,500 per annum
(ii) Depreciation (p.a.) on Machinery purchased on September 01, 2016.
= (2,50,000 + 10,000) × `10/100`
= ₹ 26,000 per annum
(b)
| Dr. | Books of Berlia Ltd. Machinery Account (Written Down Value method) |
Cr. | |||||
| Date | Particulars | J.F. | Amount ₹ |
Date | Particulars | J.F. | Amount ₹ |
| 2015 | 2015 | ||||||
| Jul.01 | Bank (i) | 85,000 | Dec.31 | Depreciation | 4,250 | ||
| (5,600 + 24,000 + 5,000) | Dec.31 | Balance c/d | 80,750 | ||||
| 85,000 | 85,000 | ||||||
| 2016 | 2016 | ||||||
| Jan.01 | Balance b/d | 80,750 | Dec.31 | Depreciation (i) 8,075, (ii) 8,667 |
16,742 | ||
| Sep.01 | (i) Bank (ii) (2,50,000 + 10,000) | 2,60,000 | Dec.31 | Balance c/d (i) 72,675, (ii) 2,51,333 |
3,24,008 | ||
| 3,40,750 | 3,40,750 | ||||||
| 2017 | 2017 | ||||||
| Jan.01 | Balance b/d | 3,24,008 | Dec.31 | Depreciation (i) 7,268, (ii) 25,133 |
32,401 | ||
| (i) 72,675, (ii) 2,51,333 | Dec.31 | Balance c/d (i) 65,407, (ii) 2,26,200 |
2,91,607 | ||||
| 3,24,008 | 3,24,008 | ||||||
| 2018 | 2018 | ||||||
| Jan.01 | Balance b/d | 2,91,607 | Dec.31 | Depreciation (i) 6,540, (ii) 22,620 | 29,160 | ||
| (i) 65,407, (ii) 2,26,200 | Dec.31 | Balance c/d (i) 58,867, (ii) 2,03,580 |
2,62,447 | ||||
| 2,91,607 | 2,91,607 | ||||||
| Dr. | Depreciation Account | Cr. | |||||
| Date | Particulars | J.F. | Amount ₹ |
Date | Particulars | J.F. | Amount ₹ |
| 2015 | 2015 | ||||||
| Dec.31 | Machinery | 4,250 | Dec.31 | Profit and Loss | 4,250 | ||
| 4,250 | 4,250 | ||||||
| 2016 | 2016 | ||||||
| Dec.31 | Machinery | 16,742 | Dec.31 | Profit and Loss | 16,742 | ||
| (i) 8,075, (ii) 8,667 | |||||||
| 16,742 | 16,742 | ||||||
| 2017 | 2017 | ||||||
| Dec.31 | Machinery (i) 7,268, (ii) 25,133 |
32,401 | Dec.31 | Profit and Loss | 32,401 | ||
| 32,401 | 32,401 | ||||||
| 2018 | 2018 | ||||||
| Dec. 31 | Machinery (i) 6,540, (ii) 22,620 |
29,160 | Dec.31 | Profit and Loss | 29,160 | ||
| 29,160 | 29,160 | ||||||
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