11th | chapter:15 | Depreciation | Question No. 21 to 24

Question 21:

On 1st April, 2019, a machinery was purchased for ` 20,000. On 1st October, 2020 another machine was purchased for ` 10,000 and on 1st April, 2021, one more machine was purchased for ` 5,000. The firm depreciates its machinery @ 10% p.a. on the Diminishing Balance Method.
What is the amount of Depreciation for the years ended 31st March, 2020, 2021 and 2022? What will be the balance in Machinery Account as on 31st March, 2022?

Answer:

I. Calculation of Depreciation from April 01, 2019 to March 31, 2022

Depreciation Rate: 10% p.a. on Diminishing Balance Method

Year	Machinery	Date of Purchase	Value	No. of Months	Amt. of Dep.	Total Dep.
March 31, 2020	M1	April 01, 2019	20,000	12	2,000	2,000
March 31, 2021	M1	April 01, 2019	18,000 (20,000 – 2,000)	12	1,800
	M2	Oct. 01,2020	10,000	6	500	2,300
March 31, 2022	M1	April 01, 2021	16,200 (18,000 – 1,800)	12	1,620
	M2	Oct. 01,2020	9,500	12	950
	M3	April 01, 2021	5,000	12	500	3,070

II. Balance in Machinery Account as on March 31, 2022 will be Rs. 27,630

Working Notes: Preparation of Machinery Account

Machinery Account

Dr.

Cr.

Date

Particulars

( `)

Date

Particulars

( `)

2019

2020

April 01

Bank A/c (M1)

20,000

March 31

Depreciation A/c (M1)

2,000

March 31

Balance c/d (M1)

18,000

20,000

2020

2021

April 01

Balance b/d (M1)

18,000

March 31

Depreciation A/c

Oct. 01

Bank A/c (M2)

10,000

M1(10,000×10×6/100/12)

*1,800

500

2,300

March 31

Balance c/d

16,200

9,500

25,700

28,000

2021

2022

April 01

Balance b/d

March 31

Depreciation A/c

16,200

1,620

9,500

25,700

950

April 01

Bank A/c (M3)

5,000

500

3,070

March 31

Balance c/d

14,580

8,550

4,500

27,630

30,700

Note: Since the question does not specify to prepare the Machinery Account, thus, it is optional to prepare this account.

Question 22:

M/s. P & Q purchased machinery for ` 40,000 on 1st October, 2018. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January, 2021, one-fourth of the machinery was found unsuitable and disposed off for ` 5,600. On the same date new machinery at a cost of ` 15,000 was purchased. Write up the Machinery account for the years ended 31st March, 2019, 2020 and 2022. Accounts are closed on 31st March each year.

Answer:

Machinery Account
Dr.	Cr.
Date		Particulars			J.F.	( `)	Date	Particulars			J.F.	( `)
2018							2019
Oct. 01		Bank					Mar.31	Depreciation
		I (3/4)	30,000					I (3/4) for 6 months	1,500
		I(1/4)	10,000			40,000		I (1/4) for 6 months	500			2,000
							Mar.31	Balance c/d
								I (3/4)	28,500
								I (1/4)	9,500			38,000
						40,000						40,000
2019							2020
Apr.01		Balance b/d					Mar.31	Depreciation
		I (3/4)		28,500				I (3/4)	2,850
		I (1/4)		9,500		38,000		I (1/4)	950			3,800
							Mar.31	Balance c/d
								I (3/4)		25,650
								I (1/4)		8,550		34,200
						38,000						38,000
2020							2021
Apr.01		Balance b/d					Jan.31	Depreciation I (1/4)(for 10 Months)				713
		I (3/4)		25,650			Jan.31	Bank I(1/4)				5,600
2021		I (1/4)		8,550		34,200		Profit and Loss (Loss)				2,237
Jan.31		Bank (II)				15,000	2021 Mar.31	Depreciation
								I (3/4)		2,565
								II (for 2 months)		250		2,815
							Mar.31	Balance c/d
								I (3/4)		23,085
								II		14,750		37,835
						49,200						49,200

Working Note

(1)Calculation of Profit or Loss on Sale of Machine I (1/4):

Particulars	( `)
Book Value of Machine (I)(1/4) on Apr. 01, 2020	8,550
Less: Depreciation for 10 Months	(713)
Book Value of Machine (I)(1/4) on Jan. 31 2021	7,837
Less: Sale Value	(5,600)
Loss on Sale of Machine I(1/4)	2,237

Question 23:

On 1st October, 2018, Meenal Sharma bought a machine for ` 25,000 on which he spent ` 5,000 for carriage and freight; ` 1,000 for brokerage of the middle-man, ` 4,000 for installation. The machine is depreciated @ 10% p.a. on written down value basis. On 31st March, 2021 the machine was sold to Deepa for ` 30,500 and ` 500 was paid as commission to broker through whom the sales was effected. Find out the profit or loss on sale of machine if accounts are closed on 31st March, every year.

Answer:

Machinery Account
Dr.							Cr.
Date	Particulars	J.F.	( `)	Date	Particulars	J.F.	( `)
2018				2019
Oct 01	Bank (25,000+5,000+1,000+4,000)		35,000	Mar.31	Depreciation (for 6 months)		1,750
				Mar.31	Balance c/d		33,250
			35,000				35,000
2019				2020
Apr.01	Balance b/d		33,250	Mar.31	Depreciation		3,325
				Mar.31	Balance c/d		29,925
			33,250				33,250
2020				2021
Apr.01	Balance b/d		29,925	Mar.31	Depreciation		2,993
2021 Mar.31	Profit and Loss A/c (Profit on Sale) (WN1)		3,068	Mar.31	Bank A/c (30,500 – 500)		30,000
			32,993				32,993

Working Note:

(1) Calculation of Profit or Loss on sale of Machine I:

Particulars	( `)
Book Value of Machine on Apr. 01, 2020	29,925
Less: Depreciation for the year	(2,993)
Book Value of Machine I on Mar. 31, 2021	26,932
Less: Sale Value (30,500 – 500)	(30,000)
Profit on Sale	3,068

Question 24:

A company purchased on 1st July, 2015 machinery costing ` 30,000. It further purchased machinery on 1st January, 2016 costing ` 20,000 and on 1st October, 2016 costing ` 10,000. On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for ` 3,000. The company follows financial year as accounting year.
Show how the Machinery Account would appear in the books of company if depreciation is charged @ 10% p.a. on Written Down Value Method.

Answer:

Machinery Account
Dr.												Cr.
Date	Particulars			J.F.	(Rs)	Date	Particulars			J.F.	(Rs)
2018						2019
July 01	Bank					Mar.31	Depreciation
	I(2/3)		20,000				I(2/3)		1,500
2019	I(1/3)		10,000		30,000		I(1/3)		750
Jan.01	Bank (II)				20,000		II		500		2,750
						Mar.31	Balance c/d
							I(2/3)		18,500
							I(1/3)		9,250
							II		19,500		47,250
					50,000						50,000
2019						2020
Apr 01	Balance b/d					Mar 31	Depreciation
	I(2/3)	18,500					I(2/3)	1,850
	I(1/3)	9,250					I(1/3)	925
	II	19,500			47,250		II	1,950
Oct 01	Bank (III)				10,000		III	500			5,225
						Mar 31	Balance c/d
							I(2/3)	16,650
							I(1/3)	8,325
							II	17,550
							III	9,500			52,025
					57,250						57,250
2020						2020
Apr.01	Balance b/d					Apr.01	Bank (I)(1/3)				3,000
	I(2/3)	16,650				Apr.01	Profit and Loss (Loss)				5,325
	I(1/3)	8,325				Mar.31,	Depreciation
	II	17,550				2021	I(2/3)	1,665
	III	9,500			52,025		II	1,755
							III	950			4,370
						Mar.31	Balance c/d
							I(2/3)	14,985
							II	15,795
							III	8,550			39,330
					52,025						52,025