Page 118 - ISCDEBK-XI

Depreciation 15.3

2019 2019
April 1 To Balance b/d: April 1 By Bank A/c (Sale) 3,000
Mach. I 24,750 April 1 By Loss on Sale of Machine A/c (Note 2) 5,250
Mach. II 17,500 (Profit & Loss A/c)
Mach. III 9,500 2020
March 31 By Depreciation A/c:
Mach. I
[` (30,000 – 10,000) × 10/100] 2,000
Mach. II
(` 20,000 × 10/100) 2,000
Mach. III
(` 10,000 × 10/100) 1,000 5,000
By Balance c/d:
Mach. I (Note 3)
` (16,500 – 2,000) 14,500
Mach. II
` (17,500 – 2,000) 15,500
Mach. III
` (9,500 – 1,000) 8,500 38,500
51,750 51,750
2020
April 1 To Balance b/d 38,500
Notes:
1. Mach. I stands for Machine I and Mach. II stands for Machine II and so on.
2. Calculation of Gain (Profit)/Loss on Sale of Machine: `
Cost of Machine (1st July, 2017) (Mach. I; ` 30,000 × 1/3) 10,000
Less: Depreciation for 2017–18 (` 2,250 × 1/3) 750
Book value as on 1st April, 2018 9,250
Less: Depreciation for 2018–19 (` 3,000 × 1/3) 1,000
Book value as on 1st April, 2019 8,250
Less: Sale Proceeds 3,000
Loss on Sale of Machine 5,250
3. Book value as on 1st April, 2019 of remaining 2/3 (Mach. I) = ` 24,750 × 2/3 = ` 16,500.
Illustration 2.
On 1st July, 2018, R.K. Traders purchased an old machine for ` 28,000 and paid ` 4,600
for its repairs and installation. The machinery started functioning on 1st September, 2018.
Another new plant was purchased for ` 45,000 and incurred installation charges ` 3,000 on
1st January, 2019. On 31st January, 2020, the plant installed on 1st July, 2018 was sold for ` 27,400
due to some mechanical problem. Depreciation is charged @ 10% p.a. on Fixed Instalment
Basis. Show Machinery Account and Depreciation Account for 2 years ended 31st March, 2020.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2018 2019
July 1 To Bank A/c (Purchase) 28,000 March 31 By Depreciation A/c (Note 1) 3,102
To Bank A/c (Installation) 4,600 By Balance c/d 77,498
2019
Jan. 1 To Bank A/c (Purchase) 45,000
To Bank A/c (Installation) 3,000
80,600 80,600
2019 2020
April 1 To Balance b/d 77,498 Jan. 31 By Bank A/c (Sale) 27,400
By Loss on Sale of Machine A/c (Note 3) 581
(Profit & Loss A/c)
March 31 By Depreciation A/c (Note 2) 7,517
By Balance c/d 42,000
77,498 77,498