Page 125 - ISCDEBK-XI

15.10 Double Entry Book Keeping—ISC XI

Working Notes:
1. Calculation of gain (profit) or loss on Sale of Machinery on 31st December, 2019: `
1st September, 2017 Purchased 45,000
31st March, 2018 Less: Depreciation @ 10% p.a. for 7 months 2,625
1st April, 2018 Book Value 42,375
31st March, 2019 Less: Depreciation @ 10% p.a. 4,237
1st April, 2019 Book Value 38,138
31st December, 2019 Less: Depreciation @ 10% p.a. for 9 months 2,860
Value on the date of sale 35,278
Less: Sale Proceeds 23,600
Loss on sale of machinery 11,678
2. Calculation of depreciation on the remaining machinery:
Written down value of Machinery on 1st April, 2019 (` 94,000 – ` 37,400) 56,600
Less: Book value (on 1st April, 2019) of the machine sold (as per WN 1) 38,138
Book value of the remaining old machinery 18,462
Depreciation on the remaining old machinery of ` 18,462 @ 10% p.a. 1,846
Depreciation on the machine purchased for ` 68,000 on 31st July, 2019 @ 10% p.a.
for 8 months 4,533
6,379
3. Accumulated depreciation balance of the machine sold transferred from Provision for Depreciation Account
to Machinery Account (` 2,625 + ` 4,237 + ` 2,860 = ` 9,722).
Illustration 7.
A Co. charged depreciation @ 20% p.a. on written down value. Machinery costing ` 1,00,000,
` 40,000 and ` 30,000 were purchased on 1st April, 2016, 1st October, 2017 and 1st January, 2019
respectively. On 1st January, 2020, machinery purchased on 1st October, 2017 was damaged
and replaced by a new machine costing ` 50,000. The damaged machinery was insured and
an insurance claim of ` 24,800 (after adjustment of value of scrap) was admitted by the
Insurance Co. The scrap was sold for ` 2,200.
Show Machinery Account and Accumulated Depreciation Account for the year ended
31st March, 2020.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2019 2020
April 1 To Balance b/d 1,70,000 Jan. 1 By Accumulated Depreciation A/c 15,520
(` 1,00,000 + ` 40,000 Jan. 1 By Cash A/c 2,200
+ ` 30,000) Jan. 1 By Insurance Co. 24,800
2020 March 31 By Balance c/d 1,80,000
Jan. 1 To Gain (Profit) on Sale of Machine A/c 2,520
(Profit & Loss A/c)
Jan. 1 To Cash A/c 50,000
2,22,520 2,22,520