Page 111 - debkxi

15.6 Double Entry Book Keeping—CBSE XI

2. Calculation of Depreciation after Sale of Machinery:
Book Value of Machinery (1st January, 2023) 66,600
Less: Book Value of Machinery sold (1st January, 2023) (Note 1) 13,320
Book value of unsold machinery on 1st January, 2023 53,280
Depreciation for 2023 = ` 53,280 × 10/100 = ` 5,328.
4. On 1st January, 2000 X Ltd. purchased from Y Ltd. a plant costing ` 4,00,000 on
instalment basis payable as follows:
on 1st January, 2000 ` 1,00,000
on 1st July, 2000 ` 1,00,000
on 1st January, 2001 ` 1,00,000
on 1st January, 2002 ` 1,00,000
The company spent ` 10,000 on transportation and installation of the plant. It was
decided to provide Depreciation on the Straight Line Method. Useful life of the
plant was estimated at 5 years. It was also estimated that at the end of the useful
life, realisable value of the plant would be ` 12,000 (gross) and dismantling cost of
plant, to be paid by company was estimated at ` 2,000. The plant was destroyed
by fire on 31st December, 2003 and an insurance claim of ` 50,000 was admitted
by the insurance company. Prepare the Plant Account, Accumulated Depreciation
Account and Plant Disposal Account assuming that the company closes its books
on 31st December every year. (KVS 2005)
Solution:
Total Cost – Net Scrap Value
Annual Depreciation =
Estimated Useful Life of Plant (in years)
`
`
` 4,00,000  10,000 – ( 12,000 – ` 2,000)
=
5
` 4,00,000
= = ` 80,000 per year.
5
Dr. PLANT ACCOUNT Cr.
Date Particulars ` Date Particulars `

2000 2000
Jan. 1 To Bank A/c 1,00,000 Dec. 31 By Balance c/d 4,10,000
To Bank A/c 10,000
To Supplier 3,00,000 4,10,000
4,10,000 4,10,000
2001 2001
Jan. 1 To Balance b/d 4,10,000 Dec. 31 By Balance c/d 4,10,000
4,10,000 4,10,000
2002 2002
Jan. 1 To Balance b/d 4,10,000 Dec. 31 By Balance c/d 4,10,000
4,10,000 4,10,000
2003 2003
Jan. 1 To Balance b/d 4,10,000 Dec. 31 By Plant Disposal A/c (Transfer) 4,10,000
4,10,000 4,10,000