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Depreciation 15.17

Unsolved Questions

1. On 1st January, 2004, machinery was purchased by X for ` 50,000. On 1st July, 2005,
additions were made to the extent of ` 10,000. On 1st April, 2006, further additions were
made to the extent of ` 6,400.
On 30th June, 2007 machinery, the original value of which was ` 8,000 on 1st January,
2004, was sold for ` 6,000. Depreciation is charged at 10% p.a. on the original cost.
Show the Machinery Account for the years from 2004 to 2007 in the books of X. X closes
the books on 31st December.
[Ans.: Profit on Sale of Machinery—` 800; Balance of Machinery A/c (31.12.07)—` 37,980.]
2. Following balances appear in the books of Gulshan Sugars and Chemical Ltd. as on
1st April, 2007: `
Machinery A/c 8,00,000
Provision for Depreciation A/c 3,10,000
On 1st July, 2007 a machine which was purchased on 1st April, 2004 for ` 1,20,000 was
sold for ` 50,000 and on the same date another machine was purchased for ` 3,20,000.
The company charges Depreciation @ 15% p.a. on original cost and closes its books on
31st March, every year.
Prepare the Machinery Account and Provision for Depreciation Account for the year 2007–08.
Show your working clearly. Also, give the Journal entry for sale of machinery.
[Ans.: Balance of Machinery Account on 31st March, 2008—` 10,00,000;
Loss on Sale of Machinery—` 11,500; Balance of Provision for
Depreciation Account on 31st March, 2008—` 3,94,000.]
3. On April 1, 2010, following balances appeared in the books of Lavi Traders: `
Furniture Account 1,00,000
Provision for Depreciation on Furniture Account 44,000
On October 1, 2010, a part of Furniture purchased for ` 40,000 on April 1, 2006, was sold for
` 10,000. On the same date a new furniture costing ` 50,000 was purchased. The depreciation
was provided @ 10% p.a. on straight line method and no depreciation was charged in the
year of sale. Prepare ‘Furniture Account’ and ‘Provision for Depreciation Account’ for the
year ending March 31, 2011.
[Ans.: Balance of Furniture A/c (31st March, 2011)—` 1,10,000; Provision for
Depreciation A/c (31st March, 2011)—` 36,500; Loss on Sale of Furniture—` 12,000.]
4. A joint stock company had bought machinery for ` 1,00,000 including a boiler worth
` 10,000. This Machinery Account was for the first four years credited for Depreciation
on the Reducing Instalment System at the rate of 10% p.a. During the fifth year, i.e., the
current year, the boiler becomes useless on account of damage to its parts. The damaged
boiler is sold for ` 2,000 which amount is credited to the Machinery Account.
Prepare the Machinery Account for the current year, adjusting therein the cash received
and the loss suffered on the damaged boiler and the Depreciation of the Machinery for the
current year. [Ans.: Loss on Sale of Boiler—` 4,561; Balance of Machinery A/c—` 53,144.]
5. On 1st October, 1999, the Sahara Transport Company purchased a truck for ` 4,00,000.
On 1st April, 2001, this truck was involved in an accident and was completely destroyed
and ` 3,00,000 were received from the Insurance Company in full settlement. On the same
date another truck was purchased by the company for ` 5,00,000. The company writes off
20% Depreciation per annum on Written Down Value Method and closes its books on
31st December every year. Give the Truck Account from 1999 to 2001.
[Ans.: Balance of Truck A/c (31.12.01)—` 4,25,000; Gain (Profit) on Sale of Truck—` 11,200.]