11th | chapter:15 | Depreciation | Question No. 5 to 8

Question 5:

On 1st April, 2018, furniture costing ` 55,000 was purchased. It is estimated that its life is 10 years at the end of which it will be sold for ` 5,000. Additions are made on 1st April 2019 and 1st October, 2021 to the value of ` 9,500 and ` 8,400 (Residual values ` 500 and ` 400 respectively). Show the Furniture Account for the first four years, if Depreciation is written off according to the Straight Line Method.

Answer:

Furniture Account
Dr.										Cr.
Date	Particulars		J.F.	( `)	Date	Particulars		J.F.	( `)
2018					2019
April 01	Bank (F1)			55,000	March 31	Depreciation (F1)			5,000
					March 31	Balance c/d (F1)			50,000
				55,000					55,000
2019					2020
April 01	Balance b/d (F1)			50,000	March 31	Depreciation
April 01	Bank (F2)			9,500		F1	5,000
						F2	900		5,900
					March 31	Balance c/d
						F1	45,000
						F2	8,600		53,600
				59,500					59,500
2020					2021
April 01	Balance b/d				March 31	Depreciation
	F1	45,000				F1	5,000
	F2	8,600		53,600		F2	900		5,900
					March 31	Balance c/d
						F1	40,000
						F2	7,700		47,700
				53,600					53,600
2021					2022
April 01	Balance b/d				March 31	Depreciation
	F1	40,000				F1	5,000
	F2	7,700		47,700		F2	900
Oct. 01	Bank (F3)			8,400		F3	400		6,300

					March 31	Balance c/d
						F1	35,000
						F2	6,800
						F3	8,000		49,800
				56,100					56,100

Working Notes:

Drepreciation on Furniture 1=55,000-5,000(Scrap Value)/10 Year= `5,000 p.a.

Drepreciation on Furniture 2=9,500-500(Scrap Value)/10 Year= `900 p.a.

Drepreciation on Furniture 3=8,400-400(Scrap Value)/10 Year= `800 p.a.

Depreciation on Furniture(for 6 Month)=800×6/12= `400

Question 6:

From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2022:

1st April, 2021	:	Purchased a second-hand machinery for ` 40,000
1st April, 2021	:	Spent ` 10,000 on repairs for making it serviceable.
30th September, 2021	:	Purchased additional new machinery for ` 20,000.
31st December, 2021	:	Repairs and renewal of machinery ` 3,000.
31st March, 2022	:	Depreciate the machinery at 10% p.a.

Answer:

Machinery Account
Dr.										Cr.
Date	Particulars	J.F.	( `)	Date	Particular			J.F.	( `)
2021				2022
Apr.01	Bank (M1)		50,000	Mar.31	Depreciation
Sept 30	Bank (M2)		20,000		M1		5,000
					M2 (6 months)		1,000		6,000
				Mar.31	Balance c/d
					M1	45,000
					M2 (6 months)	19,000			64,000
			70,000						70,000

Note:

Repair and renewal made on December 31, 2021 will not be recorded in Machinery Account because, this repair was made after putting the Machinery into use.

Question 7:

An asset was purchased for ` 10,500 on 1st April, 2014. The scrap value was estimated to to be ` 500 at the end of asset's 10 years' life. 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, 2021. Calculate the following.
(i) The Depreciation expense for the year ended 31st March, 2015.
(ii) The net book value of the asset on 31st March, 2019.
(iii) The gain or loss on sale of the asset on 31st March, 2021.

Answer:

Asset Account
Dr.								Cr.
Date	Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2014				2015
April 01	Bank		10,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		9,500
			10,500				10,500
2015				2016
April 01	Balance b/d		9,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		8,500
			9,500				9,500
2016				2017
April 01	Balance b/d		8,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		7,500
			8,500				8,500
2017				2018
April 01	Balance b/d		7,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		6,500
			7,500				7,500
2018				2019
April 01	Balance b/d		6,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		5,500
			6,500				6,500
2019				2020
April 01	Balance b/d		5,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		4,500
			5,500				5,500
2021				2022
April 01	Balance b/d		4,500	Mar.31	Depreciation		1,000
				Mar.31	Bank		600
				Mar.31	Profit and Loss (Loss)		2,900
			4,500				4,500

(i) Depreciation Expense for the year ended March 31, 2015 is Rs 1000

(ii) The Net Book Value of the asset on March 31, 2019 is Rs 5,500

(iii) Loss on Sale of the asset on March 31, 2022 is Rs 2,900

Question 8:

On 1st April, 2018, Star Ltd. purchased 5 machines for ` 60,000 each. On 1st April, 2020, one of the machine was sold at a loss of ` 8,000. On 1st July, 2021, second machine was sold at a loss of ` 12,500. A new machine was purchased for ` 1,00,000 on 1st October, 2021.
Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year and depreciation is charged @ 10% per annum as per Straight Line Method.

Answer:

Dr.	Machinery A/c						Cr.
Date		Particulars	( `)	Date	Particulars	( `)
2018				2019
April 01		To Cash/Bank A/c (60,000 × 5)	3,00,000	March 31	By Depreciation A/c (3,00,000 × 10/100)	30,000
				March 31	By balance c/d	2,70,000

			3,00,000			3,00,000
2019				2020
April 01		To balance b/d	2,70,000	March 31	By Depreciation A/c (3,00,000 × 10/100)	30,000
				March 31	By balance c/d	2,40,000

			2,70,000			2,70,000
2020				2020
April 01		To balance b/d	2,40,000	April 01	By Bank A/c (WN1)	40,000
				April 01	By Profit & Loss A/c (Loss on sale)	8,000
				2021
				March 31	By Depreciation A/c (2,40,000 × 10/100)	24,000
					(On remaining machinery)
				March 31	By balance c/d	1,68,000

			2,40,000			2,40,000
2021				2021
April 01		To balance c/d	1,68,000	July 1	By Depreciation A/c (6,000 × 3/12)	1,500
Oct.01		To Cash/Bank A/c	1,00,000	July 1	By Bank A/c (WN2)	28,000
				July 1	By Profit & Loss A/c (Loss on Sale)	12,500
				2022
				March 31	By Depreciation A/c (On remaining	23,000
					Machinery)
					[(1,80,000 × 10/100) +
					(1,00,000 × 10/100 × 6/12)]
				March 31	By balance c/d	2,03,000

			2,68,000			2,68,000

Working Notes:

1) Calculation of Sale proceeds from Machinery sold on 1^st April, 2020
Book Value of the Machine as on 1^st April, 2020	=	(Total opening balance of Machinery on this date/5)
	=	` (2,40,000/5) = ` 48,000
Loss on Sale of Machinery	=	` 8,000
Sale proceeds from the Machinery	=	Book Value of the Machine as on 1^st April, 2020 – Loss on Sale
	=	` (48,000 – 8,000) = ` 40,000

2) Calculation of Sale proceeds from Machinery sold on 1^st July 2021
Book Value of the Machine as on 1^st July, 2021	=	[(Total opening balance of Machinery on this date/4-Depreciation]
	=	` [(1,68,000/4) – 1,500] = ` 40,500
Loss on Sale of Machinery	=	` 12,500
Sale proceeds from the Machinery	=	Book Value of the Machine as on 1^st July, 2021 – Loss on Sale
	=	` (40,500 – 12,500) = ` 28,000