Page 123 - ISCDEBK-XI

15.8 Double Entry Book Keeping—ISC XI

Working Notes:

1. Calculation of Gain (Profit)/Loss on Sale of Machinery on 1st October, 2019: `
Value of sold Machine on 1st July, 2017 3,88,000
Less: Depreciation for 9 months @ 10% p.a. 29,100
Value on 1st April, 2018 3,58,900
Less: Depreciation for full year @ 10% p.a. 35,890
Value on 1st April, 2019 3,23,010
Less: Depreciation for 6 months @ 10% p.a. 16,150
Value on 1st October, 2019 3,06,860
Less: Sale proceeds 2,15,000
Loss on sale of machinery 91,860

2. Total depreciation charged on the machine sold = ` (29,100 + 35,890 + 16,150) = ` 81,140.
3. Calculation of depreciation on remaining machinery:
Value of machinery on 1st April, 2019 (cost) 9,82,000
Less: Cost of machine sold 3,88,000
Value of machinery (remaining) on 1st April, 2020 (at cost) 5,94,000
Provision for Depreciation Account balance on 1st April, 2020 2,76,000
Less: Total depreciation of the machine sold up to 1st April, 2019
(` 29,100 + ` 35,890) 64,990
Total depreciation of the remaining machinery up to 1st April, 2019 2,11,010
Value of remaining machinery (at cost) on 1st April, 2019 5,94,000
Less: Total Depreciation up to 1st April, 2019 charged 2,11,010
Written down value on 1st April, 2019 3,82,990
Depreciation on ` 3,82,990 for full year @ 10% p.a. 38,299
Depreciation on ` 3,50,000 for 7 months @ 10% p.a. 20,417
Total depreciation 58,716

Illustration 6.

On 1st April, 2019, the Machinery Account and Provision for Depreciation Account of
Mr. Akash Agarwal shows a balance of ` 94,000 and ` 37,400 respectively. On
31st July, 2019, a machine costing ` 56,000 was purchased and paid for its freight and installation
` 12,000. On 31st December, 2019, an old machine was sold at ` 23,600, which was installed on
1st September, 2017, at a cost of ` 45,000.

Depreciation is charged @ 10% p.a. by the Diminishing Balance Method. Show the Machinery
Account, Provision for Depreciation Account and Depreciation Account for the year ended 31st
March, 2020. Also, show position of the Machinery Account in the Balance Sheet.