Chapter 7 Depreciation Provisions and Reserves Solutions

Question - 21 : -
On July 01, 2010, Ashok Ltd. Purchased a Machine for Rs 1,08,000 and spent Rs 12,000 on its installation. At the time of purchase it was estimated that the effective commercial life of the machine will be 12 years and after 12 years its salvage value will be Rs 12,000.

Prepare machine account and depreciation Account in the books of Ashok Ltd. For first three years, if depreciation is written off according to straight line method. The account are closed on December 31st, every year.

Answer - 21 : -

Books of Ashok Ltd.
Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2010				2010
Jul.01	Bank		1,20,000	Dec.31	Depreciation		4,500
				Dec.31	Balance c/d		1,15,500
			1,20,000				1,20,000

2011				2011
Jan.01	Balance b/d		1,15,500	Dec.31	Depreciation		9,000
				Dec.31	Balance c/d		1,06,500
			1,15,000				1,15,500

2012				2012
Jan.01	Balance b/d		1,06,500	Dec.31	Depreciation		9,000
				Dec.31	Balance c/d		97,500
			1,06,500				1,06,500
2013
Jan.01	Balance b/d		97,500

Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2010				2010
Dec.31	Machinery		4,500	Dec.31	Profit and Loss		4,500

			4,500				4,500

2011				2011
Dec.31	Machinery		9,000	Dec.31	Profit and Loss		9,000

			9,000				9,000

2012				2012
Dec.31	Machinery		9,000	Dec.31	Profit and Loss		9,000

			9,000				9,000

Working Note:

Calculation of annualdepreciation

Depreciation (p.a.)	=	(1,08,000 + 12,000 – 12,000)
Depreciation (p.a.)	=	12 years
	=	Rs 9,000 per annum

Question - 22 : -
Reliance Ltd. Purchased a second hand machine for Rs 56,000 on October 01, 2011 and spent Rs 28,000 on its overhaul and installation before putting it to operation. It is expected that the machine can be sold for Rs 6,000 at the end of its useful life of 15 years. Moreover an estimated cost of Rs 1,000 is expected to be incurred to recover the salvage value of Rs 6,000. Prepare machine account and Provision for depreciation account for the first three years charging depreciation by fixed Instalment Method. Accounts are closed on March 31, every year.

Answer - 22 : -

Books of Reliance Ltd.
Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Oct.01	Bank		84,000
				Dec.31	Balance c/d		84,000
			84,000				84,000

2012				2012
Jan.01	Balance b/d		84,000
				Dec.31	Balance c/d		84,000
			84,000				84,000

2013				2013
Jan.01	Balance b/d		84,000
				Dec.31	Balance c/d		84,000
			84,000				84,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
				2011
				Dec.31	Depreciation		1,316
2011
Dec.31	Balance c/d		1,316
			1,316				1,316

				2012
				Jan.01	Balance b/d		1,316
2012				Dec.31	Depreciation		5,267
Dec.31	Balance c/d		6,583
			6,583				6,583

				2013
				Jan.01	Balance b/d		6,583
2013				Dec.31	Depreciation		5,267
Dec.31	Balance c/d		11,850
			11,850				11,850
				2014
				Jan.01	Balance b/d		11,850

Working Note:

Calculation of annual depreciation

Depreciation (p.a.)	=	(56,000 + 28,000 – 6,000 + 1,000)
Depreciation (p.a.)	=	15 years
	=	Rs 5,267 per annum

Question - 23 : -
Berlia Ltd. Purchased a second hand machine for Rs 56,000 on July 01, 2015 and spent Rs 24,000 on its repair and installation and Rs 5,000 for its carriage. On September 01, 2016, it purchased another machine for Rs 2,50,000 and spent Rs 10,000 on its installation.

(a) Depreciation is provided on machinery @10% p.a on original cost method annually on December 31. Prepare machinery account and depreciation account from the year 2015 to 2018.
(b) Prepare machinery account and depreciation account from the year 2015 to 20018, if depreciation is provided on machinery @10% p.a. on written down value method annually on December 31.

Answer - 23 : -

Books of Berlia Ltd. (a)
Machinery Account (Original Cost Method)
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Jul.01	Bank (i)		85,000	Dec.31	Depreciation		4,250
	(5,600 + 24,000 + 5,000)			Dec.31	Balance c/d		80,750
			85,000				85,000

2016				2016
Jan.01	Balance b/d (i)		80,750	Dec.31	Depreciation
Sep.01	Bank (ii)		2,60,000		(i) 8,500, (ii) 8,667		17,167
	(2,50,000 + 10,000)			Dec.31	Balance c/d		3,23,583
					(i) 72,250, (ii) 2,51,333
			3,40,750				3,40,750

2017				2017
Jan.01	Balance b/d		3,23,583	Dec.31	Depreciation
	(i) 72,250, (ii) 2,51,333				(i) 8,500, (ii) 26,000		34,500
				Dec.31	Balance c/d
					(i) 63,750, (ii) 2,25,333		2,89,083
			3,23,583				3,23,583

2018	Balance b/d			2018
Jan.01	(i) 63,750, (ii) 2,25,333		2,89,083	Dec.31	Depreciation
					(i) 8,500, (ii) 26,000		34,500
				Dec.31	Balance c/d
					(i) 55,250, (ii) 1,99,333		2,54,583
			2,89,083				2,89,083

Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Dec.31	Machinery		4,250	Dec.31	Profit and Loss		4,250
			4,250				4,250

2016				2016
Dec.31	Machinery			Dec.31	Profit and Loss		17,167
	(i) 8,500 (ii) 8,667		17,167
			17,167				17,167

2017				2017
Dec.31	Machinery			Dec.31	Profit and Loss		34,500
	(i) 8,500 (ii) 26,000		34,500
			34,500				34,500

2018				2018
Dec.31	Machinery		34,500	Dec.31	Profit and Loss		34,500
	(i) 8,500 (ii) 26,000		34,500				34,500

Working notes:Calculation of annual depreciation

(i) Depreciation (p.a.) on Machinery Purchased on July 01,2015

	= (56,000 + 24,000 + 5,000) ×	10
	= (56,000 + 24,000 + 5,000) ×	100
	= Rs 8,500 per annum

(ii) Depreciation (p.a.) on Machinery purchased onSeptember 01, 2016.

	= (2,50,000 + 10,000) ×	10
	= (2,50,000 + 10,000) ×	100
	= Rs 26,000 per annum

(b)

Machinery Account (Written Down Value method)
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Jul.01	Bank (i)		85,000	Dec.31	Depreciation		4,250
	(5,600 + 24,000 + 5,000)			Dec.31	Balance c/d		80,750
			85,000				85,000

2016				2016
Jan.01	Balance b/d (i)		80,750	Dec.31	Depreciation
Sep.01	Bank (ii)		2,60,000		(i) 8,075, (ii) 8,667		16,742
	(2,50,000 + 10,000)			Dec.31	Balance c/d
					(i) 72,675, (ii) 2,51,333		3,24,008
			3,40,750				3,40,750

2017				2017
Jan.01	Balance b/d		3,24,008	Dec.31	Depreciation
	(i) 72,675, (ii) 2,51,333				(i) 7,268, (ii) 25,133		32,401
				Dec.31	Balance c/d
					(i) 65,407, (ii) 2,26,200		2,91,607
			3,24,008				3,24,008

2018	Balance b/d			2018
Jan.01	(i) 65,407, (ii) 2,26,200		2,91,607	Dec.31	Depreciation
					(i) 6,540, (ii) 22,620		29,160
				Dec.31	Balance c/d
					(i) 58,867, (ii) 2,03,580		2,62,447
			2,91,607				2,91,607

Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Dec.31	Machinery		4,250	Dec.31	Profit and Loss		4,250
			4,250				4,250

2016				2016
Dec.31	Machinery			Dec.31	Profit and Loss		16,742
	(i) 8,075, (ii) 8,667		16,742
			16,742				16,742

2017				2017
Dec.31	Machinery			Dec.31	Profit and Loss		32,401
	(i) 7,268, (ii) 25,133		32,401
			32,401				32,401

2018				2018
Dec.31	Machinery			Dec.31	Profit and Loss		29,160
	(i) 6,540, (ii) 22,620		29,160
			29,160				29,160

Question - 24 : -
Ganga Ltd. purchased a machinery on January 01, 2014 for Rs 5,50,000 and spent Rs 50,000 on its installation. On September 01, 2014 it purchased another machine for Rs 3,70,000. On May 01, 2015 it purchased another machine for Rs 8,40,000 (including installation expenses).
Depreciation was provided on machinery @10% p.a. on original cost method annually on December 31. Prepare:
(a) Machinery account and depreciation account for the years 2014, 2015, 2016 and 2017.
(b) If depreciation is accumulated in provision for Depreciation account then prepare machine account and provision for depreciation account for the years 2014, 2015, 2016 and 2017.

Answer - 24 : -

(a)

Books of Ganga Ltd. Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2014
Jan.01	Bank (i)		6,00,000	Dec.31	Depreciation (i) 60,000 (ii) 12,333		72,333
	(5,50,000 + 50,000)			Dec.31	Balance c/d
Sep.01	Bank (ii)		3,70,000		(i) 5,40,000, (ii) 3,57,667		8,97,667
			9,70,000				9,70,000

2015				2015
Jan.01	Balance b/d			Dec.31	Depreciation
	(i) 5,40,000, (ii) 3,57,667		8,97,667		(i) 60,000, (ii) 37,000,
May.01	Bank (iii)		8,40,000		(iii) 56,000		1,53,000
				Dec.31	Balance c/d
					(i) 4,80,000 (ii) 3,20,667,
					(iii) 7,84,000		15,84,667
			17,37,667				17,37,667

2016				2016
Jan.01	Balance b/d			Dec.31	Depreciation
	(i) 4,80,000, (ii) 3,20,667				(i) 60,000, (ii) 37,000,
	(iii) 7,84,000		15,84,667	Dec.31	(iii) 84,000		1,81,000
					Balance c/d
					(i) 4,20,000, (ii) 2,83,667,
					(iii) 7,00,000		14,03,667
			15,84,667				15,84,667

2017				2017
Jan.01	Balance b/d			Dec.31	Depreciation
	(i) 4,20,000, (ii) 2,83,667,				(i) 60,000, (ii) 37,000,
	(iii) 7,00,000		14,03,667		(iii) 84,000		1,81,000
				Dec.31	Balance c/d
					(i) 3,60,000, (ii) 2,46,667,
					(iii) 6,16,000		12,22,667
			14,03,667				14,03,667

Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2014
Dec.31	Machinery		72,333	Dec.31	Profit and Loss		72,333
			72,333				72,333

2015				2015
Dec.31	Machinery		1,53,000	Dec.31	Profit and Loss		1,53,000
			1,53,000				1,53,000

2016				2016
Dec.31	Machinery		1,81,000	Dec.31	Profit and Loss		1,81,000
			1,81,000				1,81,000

2017				2017
Dec.31	Machinery		1,81,000	Dec.31	Profit and Loss		1,81,000
			1,81,000				1,81,000

(b)

Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2014
Jan.01	Bank (i)		6,00,000
	(5,50,000 + 50,000)			Dec.31	Balance c/d
Sep.01	Bank (ii)		3,70,000				9,70,000
			9,70,000				9,70,000

2015				2015
Jan.01	Balance b/d
	(i) 6,00,000 (ii) 3,70,000		9,70,000
May.01	Bank (iii)		8,40,000	Dec.31	Balance c/d		18,10,000
			18,10,000				18,10,000

2016				2016
Jan.01	Balance b/d			Dec.31	Balance c/d		18,10,000
	(i) 6,00,000 (ii) 3,70,000
	(iii) 8,40,000		18,10,000
			18,10,000				18,10,000

2017				2017
Jan.01	Balance b/d			Dec.31	Balance c/d		18,10,000
	(i) 6,00,000 (ii) 3,70,000
	(iii) 8,40,000		18,10,000
			18,10,000				18,10,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2014
Dec.31	Balance c/d		72,333	Dec.31	Depreciation		72,333

			72,333				72,333

				2015
2015				Jan.01	Balance b/d		72,333
Dec.31	Balance c/d		2,25,333	Dec.31	Depreciation		1,53,000
			2,25,333				2,25,333

				2016
2016				Jan.01	Balance b/d		2,25,333
Dec.31	Balance c/d		4,06,333	Dec.31	Depreciation		1,81,000
			4,06,333				4,06,333

				2017
2017				Jan.01	Balance b/d		4,06,333
Dec.31	Balance c/d		5,87,333	Dec.31	Depreciation		1,81,000
			5,87,333				5,87,333

Question - 25 : - Azad Ltd. purchased furniture on October 01, 2014 for Rs 4,50,000. On March 01, 2015 it purchased another furniture for Rs 3,00,000. On July 01, 2016 it sold off the first furniture purchased in 2014 for Rs 2,25,000. Depreciation is provided at 15% p.a. on written down value method each year. Accounts are closed each year on March 31. Prepare furniture account, and accumulated depreciation account for the years ended on March 31, 2015, March 31, 2016 and March 31, 2017. Also give the above two accounts if furniture disposal account is opened.

Answer - 25 : -

Books of Azad Ltd.
Furniture Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2014				2015
Oct.01	Bank (i)		4,50,000
2015				Mar.31	Balance c/d		7,50,000
Mar.01	Bank (ii)		3,00,000
			7,50,000				7,50,000

2015				2016
Apr.01	Balance b/d
	(i) 4,50,000, (ii) 3,00,000		7,50,000	Mar.31	Balance c/d		7,50,000
			7,50,000				7,50,000

2016				2016
Apr.01	Balance b/d		7,50,000	July 01	Furniture Disposal		4,50,000
	(i) 4,50,000, (ii) 3,50,000			2005
				Mar.31	Balance c/d		3,00,000
			7,50,000				7,50,000

Accumulated Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Mar.31	Balance c/d		37,500	Mar.31	Depreciation
					(i) 33,750, (ii) 3,750		37,500
			37,500				37,500

2016				2015
Mar.31	Balance c/d		1,44,376	Apr.01	Balance b/d		37,500
				2016
				Mar.31	Depreciation
					(i) 62,438, (ii) 44,378		1,06,876
			1,44,376				1,44,376

2016				2016
July.01	Furniture Disposal		1,09,456	Apr.01	Balance b/d		1,44,376
2017				July.01	Depreciation (i)		13,268
Mar.31	Balance c/d		85,960	2017
				Mar.31	Depreciation (ii)		37,772

			1,95,416				1,95,416

Furniture Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2016				2016
Jul.01	Furniture		4,50,000	Jul.01	Accumulated Dep.		1,09,456
				Jul.01	Bank		2,25,000
				Jul.01	Profit and Loss (Loss)		1,15,544

			4,50,000				4,50,000

Working Note:

Furniture (i)

Years	Opening Balance		Depreciation			Closing Balance
2014 – 2015	4,50,000	–	33,750		=	4,16,250
2015 – 2016	4,16,250	–	62,438		=	3,53,812
2016	3,53,812	–	13,268	(3 months)	=	3,40,544
			1,09,456
Balance on July 01, 2016	3,40,544
Less: Sale on July 01, 2016	(2,25,000)
Loss on sale of furniture	1,15,544

Question - 26 : -
M/s Lokesh Fabrics purchased a Textile Machine on April 01, 2011 for Rs 1,00,000. On July 01, 2012 another machine costing Rs 2,50,000 was purchased. The machine purchased on April 01, 2011 was sold for Rs 25,000 on October 01, 2015. The company charges depreciation @15% p.a. on straight line method. Prepare machinery account and machinery disposal account for the year ended March 31, 2016.

Answer - 26 : -

Books of M/s. Lokesh Fabrics
Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2012
Apr.01	Bank (i)		1,00,000	Mar.31	Depreciation		15,000
				Mar.31	Balance c/d		85,000

			1,00,000				1,00,000

2012				2013
Apr.01	Balance b/d		85,000	Mar.31	Depreciation
July.01	Bank (ii)		2,50,000		(i) 15,000 + 28,125		43,125
				Mar.31	Balance c/d
					(i) 70,000, (ii) 2,21,875		2,91,875
			3,35,000				3,35,000

2013				2014
Apr.01	Balance b/d			Mar.31	Depreciation
	(i) 70,000, (ii) 2,21,875		2,91,875		(i) 15,000, (ii) 37,500		52,500
				Mar.31	Balance c/d
					(i) 55,000, (ii) 1,84,375		2,39,375
			2,91,875				2,91,875

2014				2015
Apr.01	Balance b/d			Mar.31	Depreciation
	(i) 5,500, (ii) 1,84,375		2,39,375		(i) 15,000, (ii) 37,500		52,500
				Mar.31	Balance c/d
					(i) 40,000, (ii) 1,46,875		1,86,875

			2,39,375				2,39,375

2015				2015
Apr.01	Balance b/d			Oct.01	Depreciation		7,500
	(i) 40,000, (ii) 1,46,875		1,86,875	Oct.01	Machinery Disposal		32,500
				2016
				Mar.31	Depreciation (ii)		37,500
				Mar.31	Balance c/d		1,09,375

			1,86,875				1,86,875

Machinery Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Oct.01	Machinery		32,500	Oct.01	Bank		25,000
				Oct.01	Profit and Loss		7,500
			32,500				32,500

Question - 27 : - The following balances appear in the books of Crystal Ltd, on Jan 01, 2015

Rs

Machinery account on

15,00,000

Provision for depreciation account

5,50,000

On April 01, 2015 a machinery which was purchased on January 01, 2012 for Rs 2,00,000 was sold for Rs 75,000. A new machine was purchased on July 01, 2015 for Rs 6,00,000. Depreciation is provided on machinery at 20% p.a. on Straight line method and books are closed on December 31 every year. Prepare the machinery account and provision for depreciation account for the year ending December 31, 2015.

Answer - 27 : -

Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Jan.01	Balance b/d		15,00,000	Apr.01	Machinery Disposal		2,00,000
	(13,00,000 + 2,00,000)
Jul.01	Bank		6,00,000	Dec.31	Balance c/d		19,00,000
			21,00,000				21,00,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Apr.01	Machinery Disposal		1,30,000	Jan.01	Balance b/d		5,50,000
Apr.01	Balance c/d		7,50,000	Apr.01	Depreciation		10,000
				Dec.31	Depreciation
					(i) 2,60,000, (ii) 60,000		3,20,000
			8,80,000				8,80,000

Working Note:

Machine Sold on July 01, 2015

(i)		Years	Opening Balance			Depreciation		Closing Balance
	2012		2,00,000		–	40,000	=	1,60,000
	2013		1,60,000		–	40,000	=	1,20,000
	2014		1,20,000		–	40,000	=	80,000
	2015		80,000		–	10,000	=	70,000
			Accumulated Depreciation		=	1,30,000

Value on April 01, 2015			=	(70,000)
Less: Sale			=	75,000
Profit on sale of Machinery				5,000

Machinery Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2015				2015
Apr.01	Machinery		2,00,000	Apr.01	Provision for Depreciation		1,30,000
Apr.01	Profit and Loss (Profit)		5,000	Apr.01	Bank		75,000


			2,05,000				2,05,000

Question - 28 : -
M/s. Excel Computers has a debit balance of Rs 50,000 (original cost Rs 1,20,000) in computers account on April 01, 2010. On July 01, 2010 it purchased another computer costing Rs 2,50,000. One more computer was purchased on January 01, 2011 for Rs 30,000. On April 01, 2014 the computer which has purchased on July 01, 2010 became obsolete and was sold for Rs 20,000. A new version of the IBM computer was purchased on August 01, 2014 for Rs 80,000. Show Computers account in the books of Excel Computers for the years ended on March 31 2011, 2012, 2013, 2014 and 2015. The computer is depreciated @10 p.a. on straight line method basis.

Answer - 28 : -

Books of M/s Excel Computers
Computer Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2010				2011
Apr.01	Balance b/d (i)		50,000	Mar.31	Depreciation
Jul.01	Bank (ii)		2,50,000		(i) 12,000, (ii) 18,750,
2011					(iii) 750		31,500
Jan.01	Bank (iii)		30,000	Mar.31	Balance c/d
					(i) 38,000, (ii) 2,31,250,
					(iii) 29,250		2,98,500
			3,30,000				3,30,000

2011				2012
Apr.01	Balance b/d			Mar.31	Depreciation
	(i) 38,000, (ii) 2,31,250,				(i) 12,000 (ii) 25,000,
	(iii) 29,250		2,98,500		(iii) 3,000		40,000
				Mar.31	Balance c/d
					(i) 26,000 (ii) 2,06,250,
					(iii) 26,250		2,58,500
			2,98,500				2,98,500

2012				2013
Apr.01	Balance b/d			Mar.31	Depreciation
	(i) 26,000 (ii) 2,06,250,				(i) 12,000, (ii) 25,000,		40,000
	(iii) 26,250		2,58,500	Mar.31	(iii) 3,000
					Balance c/d
					(i) 14,000, (ii) 1,81,250,
					(iii) 23,250		2,18,500
			2,58,500				2,58,500

2013				2014
Apr.01	Balance b/d			Mar.31	Depreciation
	(i) 14,000, (ii) 1,81,250,				(i) 12,000, (ii) 25,000,		40,000
	(iii) 23,250		2,18,500		(iii) 3,000
				Mar.31	Balance c/d
					(i) 2,000, (ii) 1,56,250,
					(iii) 20,250		1,78,500
			2,18,500				2,18,500

2014				2014
Apr.01	Balance c/d			Apr.01	Bank (ii)		20,000
	(i) 2,000, (ii) 1,56,250,			Apr.01	Profit and Loss (Loss)		1,36,250
	(iii) 20,250		1,78,500	2015
Aug.01	Bank (iv)		80,000	Mar.31	Depreciation		10,333
					(i) 2,000, (iii) 3,000, (iv) 5,333
				Mar.31	Balance c/d
					(iii) 17,250, (iv) 74,667		91,917
			2,58,500				2,58,500

Question - 29 : -
Saraswati Ltd. purchased a machinery costing Rs 10,00,000 on January 01, 2011. A new machinery was purchased on 01 May, 2012 for Rs 15,00,000 and another on July 01, 2014 for Rs 12,00,000. A part of the machinery which originally cost Rs 2,00,000 in 2011 was sold for Rs 75,000 on April 30, 2014. Show the machinery account, provision for depreciation account and machinery disposal account from 2011 to 2015 if depreciation is provided at 10% p.a. on original cost and account are closed on December 31, every year.

Answer - 29 : -

Books of Saraswati Ltd. Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2011				2011
Jan.01	Bank (i)		10,00,000
	(8,00,000 + 2,00,000)			Dec.31	Balance c/d		10,00,000
			10,00,000				10,00,000

2012				2012
Jan.01	Balance b/d		10,00,000	Dec.31	Balance c/d		25,00,000
May.01	Bank (ii)		15,00,000
			25,00,000				25,00,000

2013				2013
Jan.01	Balance b/d		25,00,000	Dec.31	Balance c/d		25,00,000
			25,00,000				25,00,000

2014				2014
Jan.01	Balance b/d		25,00,000	Apr. 30	Machinery Disposal		2,00,000
Jul.01	Bank (ii)		12,00,000	Dec.31	Balance c/d
					(i) 8,00,000 (ii) 15,00,000
					(iii) 12,00,000		35,00,000
			37,00,000				37,00,000

2015				2015
Jan.01	Balance c/d		35,00,000	Dec.31	Balance c/d		35,00,000
			35,00,000				35,00,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2011				2011
Dec.31	Balance c/d		1,00,000
				Dec.31	Depreciation (i)		1,00,000
			1,00,000				1,00,000

2012				2012
Dec.31	Balance c/d		3,00,000	Jan.01	Balance c/d		1,00,000
				Dec.31	Depreciation
					(i) 1,00,000 (ii) 1,00,000		2,00,000
					(8 months)
			3,00,000				3,00,000

2013				2013
Dec.31	Balance b/d		5,50,000	Jan.01	Balance c/d		3,00,000
				Dec.31	Depreciation		2,50,000
			5,50,000		(i) 1,00,000 (ii) 1,50,000,		5,50,000

2014				2014
Apr. 30	Machinery Disposal		66,667	Jan.01	Balance b/d		5,50,000
Dec.31	Balance c/d		7,80,000	Apr. 30	Depreciation		6,667
				Dec.31	Depreciation
					(i) 80,000, (ii) 1,50,000,
					(iii) 60,000		2,90,000
			8,46,667				8,46,667

2015				2015
Dec.31	Balance c/d		11,30,000	Jan.01	Balance c/d		7,80,000
				Dec.31	Depreciation
					(i) 80,000, (ii) 1,50,000,
					(iii) 1,20,000		3,50,000
			11,30,000				11,30,000

Machinery Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2014				2014
Apr. 30	Machinery		2,00,000	Apr. 30	Provision for Depreciation		66,667
				Apr. 30	Bank		75,000
				Apr. 30	Profit and Loss (Loss)		58,333

			2,00,000				2,00,000

Working Note:

	Opening Balance		Depreciation		Closing Balance
2011	2,00,000	–	20,000	=	1,80,000
2012	1,80,000	–	20,000	=	1,60,000
2013	1,60,000	–	20,000	=	1,40,000
2014	1,40,000	–	6,667	=	1,33,333
	Accumulated Depreciation		66,667

Value on Apr. 30, 2014	1,33,333
Sale on Apr. 30, 2014	– 75,000
Loss on sale	₹ 58,333

Question - 30 : -
Carriage Transport Company purchased 5 trucks at the cost of Rs 2,00,000 each on April 01, 2011. The company writes off depreciation @ 20% p.a. on original cost and closes its books on December 31, every year. On October 01, 2013, one of the trucks is involved in an accident and is completely destroyed. Insurance company has agreed to pay Rs 70,000 in full settlement of the claim. On the same date the company purchased a second hand truck for Rs 1,00,000 and spent Rs 20,000 on its overhauling. Prepare truck account and provision for depreciation account for the three years ended on December 31, 2013. Also give truck account if truck disposal account is prepared.

Answer - 30 : -

Books of Carriage Transport Company
Truck Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Apr.01	Bank		10,00,000	Dec.31	Balance c/d		10,00,000
			10,00,000				10,00,000

2012				2012
Jan.01	Balance b/d		10,00,000	Dec.31	Balance c/d		10,00,000
			10,00,000				10,00,000

2013				2013
Jan.01	Balance b/d		10,00,000	Oct.01	Truck Disposal		2,00,000
Oct.01	Bank		1,20,000	Dec.31	Balance c/d		9,20,000
			11,20,000				11,20,000

Provision for Depreciation Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2011				2011
Dec.31	Balance c/d		1,50,000	Dec.31	Depreciation		1,50,000
			1,50,000				1,50,000

2012				2012
Dec.31	Balance c/d		3,50,000	Jan.01	Balance c/d		1,50,000
				Dec.31	Depreciation		2,00,000
			3,50,000				3,50,000

2013				2013
Oct.01	Truck Disposal		1,00,000	Jan.01	Balance b/d		3,50,000
Oct.01	Balance c/d		4,46,000	Oct.01	Depreciation (9 Months)		30,000
				Dec.31	Depreciation
					(1,60,000 + 6,000)		1,66,000

			5,46,000				5,46,000

Truck Disposal Account
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2013				2013
Oct.01	Truck		2,00,000	Oct.01	Provision for Depreciation		1,00,000
				Oct.01	Insurance Co. (Insurance Claim)		70,000
				Oct.01	Profit and Loss (Loss)		30,000

			2,00,000				2,00,000

Working Note:

Truckinvolved in accident

	Opening Balance				Depreciation		Closing Balance
Apr.01, 2011	2,00,000			–	30,000	=	1,70,000
Jan.01, 2012	1,70,000			–	40,000	=	1,30,000
Jan.01, 2013	1,30,000			–	30,000	=	1,00,000
	Accumulated Depreciation			=	1,00,000

Value on Oct.01, 2013		=	1,00,000
Less: Insurance Claim		=	70,000
Loss on Accident			30,000

Free - Previous Years Question Papers

	Rs
Machinery account on	15,00,000
Provision for depreciation account	5,50,000

Chapter 7 Depreciation Provisions and Reserves Solutions

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