Page 110 - debkxi
P. 110

Depreciation                                                                   15.5

                     Notes:
                       1.  Mach. I, stands for Machine I and Mach. II stands for Machine II and so on.
                       2.  Calculation of Profit/Loss on Sale of Machine:                           `
                          Cost of Machine (1st April, 2021) (Mach. I, ` 30,000 × 1/3)              10,000
                        Less:  Depreciation for 2021 (` 2,250 × 1/3)                                 750
                          Book value as on 1st January, 2022                                        9,250
                        Less:  Depreciation for 2022                                                1,000
                          Book Value as on 1st January, 2023                                        8,250
                        Less:  Sale Proceeds                                                        3,000
                          Loss on Sale                                                              5,250
                      3.  A  company  purchased  a  machinery  for  `  80,000  on  1st  April,  2021  and
                        decided to write off  at 10% annually  on  the  Diminishing  Balance Method.  On
                        1st July, 2023 a part of the machinery valued in the books of the firm at ` 16,000
                        on 1st April, 2021 was sold for ` 10,000.
                         Show the Machinery Account in the books of the company for the years 2021, 2022
                        and 2023. Accounts are closed each year on 31st December.
                     Solution:
                     Dr.                             MACHINERY ACCOUNT                                Cr.
                     Date     Particulars                `     Date     Particulars                `
                     2021                                       2021
                     April   1  To  Bank A/c            80,000   Dec.  31  By  Depreciation A/c      6,000
                                                                Dec.  31  By  Balance c/d          74,000
                                                        80,000                                     80,000
                     2022                                       2022
                     Jan.   1  To  Balance b/d          74,000   Dec.  31  By  Depreciation A/c      7,400
                                                                Dec.  31  By  Balance c/d          66,600
                                                        74,000                                     74,000
                     2023                                       2023
                     Jan.   1  To  Balance b/d          66,600   July   1  By  Bank A/c—Sale       10,000
                                                                July   1  By  Depreciation A/c (Note 1)      666
                                                                July   1  By  Loss on Sale of Machinery A/c    2,654
                                                                           (Profit & Loss A/c) (Note 1)
                                                                Dec.  31  By  Depreciation A/c      5,328
                                                                            (Unsold Machinery) (Note 2)
                                                                Dec.  31  By  Balance c/d          47,952
                                                        66,600                                     66,600

                     Notes:
                      1.  Calculation of Loss on Sale of Machinery:                                 `
                         Book value of Machinery (1st April, 2021)                                 16,000
                        Less: Depreciation (2021) (` 16,000 × 10/100 × 9/12)                        1,200
                         Book Value of Machinery (1st January, 2022)                               14,800
                        Less: Depreciation (2022) (` 14,800 × 10/100)                               1,480
                         Book Value of Machinery (1st January, 2023)                               13,320
                        Less: Depreciation (2023) (` 13,320 × 10/100 × 6/12)                         666
                         Book Value of Machinery (1st July, 2023)                                  12,654
                        Less: Sale Proceeds                                                        10,000
                         Loss on Sale                                                               2,654
   105   106   107   108   109   110   111   112   113   114   115