Page 134 - ISCDEBK-XI

Depreciation 15.19

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.
Date Particulars ` Date Particulars `

2017 2017
March 31 To Balance c/d 30,000 March 31 By Depreciation A/c (M1) 30,000
2018 2017
March 31 To Balance c/d: April 1 By Balance b/d 30,000
M1 90,000 2018
M2 20,000 1,10,000 March 31 By Depreciation A/c:
M1 60,000
M2 20,000 80,000
1,10,000 1,10,000
2018 2018
Oct. 1 To Machinery A/c 40,000 April 1 By Balance b/d 1,10,000
[(` 90,000 × 1/3) + (` 10,000)] Oct. 1 By Depreciation A/c 10,000
2019 2019
March 31 To Balance c/d: March 31 By Depreciation A/c:
M1 1,00,000 M1 40,000
M2 40,000 M2 20,000
M3 5,000 1,45,000 M3 5,000 65,000
1,85,000 1,85,000
2019
April 1 By Balance b/d 1,45,000

Unsolved Questions

1. An asset was purchased for ` 10,500 on 1st April, 2013. The scrap value was estimated to be ` 500 at the
end of its estimated useful life of 10 years. Straight Line Method of depreciation was used. The accounting
year ends on 31st March every year. The asset was sold for ` 600 on 31st March, 2020. Calculate:
(i) the depreciation expense for the year ended 31st March, 2014.
(ii) the net book value of the asset on 31st March, 2018.
(iii) the gain or loss on sale of the asset on 31st March, 2020.
2. X Ltd. imported a machine on 1st October, 2017 for ` 2,00,000, paid customs duty and freight ` 60,000
and incurred erection charges of ` 40,000. Another local machinery costing ` 1,00,000 was purchased on
1st April, 2018. On 1st October, 2019, one-third of the imported machine got out of order and was
sold for ` 40,000. Another machine was purchased to replace the same for ` 50,000 on the same date.
Depreciation is to be calculated @ 20% p.a. following Straight Line Method. Accounts are closed every year
on 31st March.
Show Machinery Account and Provision for Depreciation Account for 2017–18, 2018–19 and 2019–20.

GUIDE TO ANSWERS

1. (i) Depreciation Expense for the year ended 31st March, 2014—` 1,000; (ii) Net Book Value on 31st March,
2018—` 5,500; (iii) Loss on Sale of Asset on 31st March, 2020—` 2,900.
2. Balance of Machinery A/c (31st March, 2020)—` 3,50,000; Provision for Depreciation A/c (31st March,
2020)—` 1,45,000 (M I—` 1,00,000, M II—` 40,000; M III—` 5,000); Loss on Sale of Machinery—` 20,000.