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Depreciation 15.13

4. Depreciation for 2019
On Machine II (` 80,000 × 95/100 × 1/10) 7,600
On Machine III (` 30,000 × 95/100 × 1/10) 2,850
On Machine IV (` 90,000 × 95/100 × 1/10) 8,550
19,000

Advanced Level Questions
Illustration 9.
Hopefull Ltd. write off depreciation @ 10% per annum on the diminishing balance. On 1st April, 2016,
the Machinery Account showed a balance of ` 2,98,000. It was discovered in the year 2016–17 that:
(i) Heavy repairs affected to Plant and Machinery (completed on 30th September, 2014) were
debited to Machinery Account. The amount was ` 30,000; and
(ii) A machine costing ` 12,000 was entered in the Purchases Book on 1st January, 2015. The
expenses on installation, ` 800, were debited to General Expenses Account.
Necessary corrections were made in the year 2016–17. On 30th September, 2016 a machine which
had costed ` 40,000 on 1st April, 2014 was sold for ` 29,000 and a new machine costing ` 58,000
was purchased on the same date, the expenses on installing the machine were ` 3,000.
Show the Machinery Account for the year ended 31st March, 2017.
Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2016 2016
April 1 To Balance b/d 2,98,000 April 1 By Profit & Loss A/c 25,650
To Gain (Profit) on Sale of Machine A/c 11,232 (Repairs) (WN 1)
(For machine purchased on Sept. 30 By Bank A/c (Sale) 29,000
1st Jan. 2015) (WN 2) By Depreciation A/c (WN 3) 1,620
Sept. 30 To Bank A/c (` 58,000 + ` 3,000) 61,000 (for 6 months)
By Loss on Sale of Machine A/c 1,780
(WN 3)
2017
March 31 By Depreciation A/c (WN 5) 28,168
March 31 By Balance c/d 2,84,014
3,70,232 3,70,232
Working Notes:
1. Calculation of Book Value of Heavy Repairs: `
Machine Account wrongly debited for repairs on 30th September, 2014 30,000
Less: Depreciation for 2014–15 (` 30,000 ×10/100 × 6/12) 1,500
Book Value as on 1st April, 2015 28,500
Less: Depreciation for 2015–16 (` 28,500 × 10/100) 2,850
Book Value as on 1st April, 2016 25,650
Amount credited to Machinery A/c and debited to Profit & Loss A/c
2. Calculation of Book Value of New Machine wrongly entered in the Purchases and Installation Expenses debited
to General Expenses Account: `
Machine purchased on 1st January, 2015 (` 12,000 + ` 800) 12,800
Less: Depreciation for 3 months (2014–15) (` 12,800 × 10/100 × 3/12) 320
Book Value as on 1st April, 2015 12,480
Less: Depreciation for 2015–16 (` 12,480 × 10/100) 1,248
Book Value as on 1st April, 2016 11,232
Amount debited to Machinery A/c and credited to Profit & Loss A/c