11th | chapter:15 | Depreciation | Question No. 17 to 20 | Ts grewal Solution 2022-2023

The original cost of furniture amounted to `4,000 and it is decided to write off 5% on the original cost as Depreciation at the end of each year. Show the Ledger Account as it will appear during the first four years. Show also how the same account will appear if it was decided to write off 5% p.a. on the diminishing balance of the asset each year.

 Furniture Account (Original Cost Method) Dr. Cr. Date Particulars J.F. ( `) Date Particulars J.F. ( `) I year I year Jan.01 Bank 4,000 Dec.31 Depreciation 200 Dec.31 Balance c/d 3,800 4,000 4,000 II year II year Jan.01 Balance b/d 3,800 Dec.31 Depreciation 200 Dec.31 Balance c/d 3,600 3,800 3,800 III year III year Jan.01 Balance b/d 3,600 Dec.31 Depreciation 200 Dec.31 Balance c/d 3,400 3,600 3,600 IV year IV year Jan.01 Balance b/d 3,400 Dec.31 Depreciation 200 Dec.31 Balance c/d 3,200 3,400 3,400

Note: Depreciation 4,000×5/100=  ` 200 p.a.

 Furniture Account (Diminishing Balance Method) Dr. Cr. Date Particulars J.F. ( `) Date Particulars J.F. ( `) I year I year Jan.01 Bank 4,000 Dec.31 Depreciation 200 Dec.31 Balance c/d 3,800 4,000 4,000 II year II year Jan.01 Balance b/d 3,800 Dec.31 Depreciation 190 Dec.31 Balance c/d 3,610 3,800 3,800 III year III year Jan.01 Balance b/d 3,610 Dec.31 Depreciation 181 Dec.31 Balance c/d 3,429 3,610 3,610 IV year IV year Jan.01 Balance b/d 3,429 Dec.31 Depreciation 171 Dec.31 Balance c/d 3,258 3,429 3,429

Note: Depreciation is calculated on opening balance every year By using below formula

Annual Depreciation = Opening Balance ×5/100

Question 18:

Babu purchased on 1st April, 2020, a machine for  ` 6,000. On 1st October, 2020, he also purchased another machine for  ` 5,000. On 1st October, 2021, he sold the machine purchased on 1st April, 2020 for  ` 4,000.
It was decided that Depreciation @ 10% p.a. was to be written off every year under Diminishing Balance Method.
Assuming the accounts were closed on 31st March every year, show the Machinery Account for the years ended 31st March, 2021 and 2022.

 Books of Babu Machinery Account Dr. Cr. Date Particulars J.F. ( `) Date Particulars J.F. ( `) 2020 2021 Apr. 01 Bank (I) 6,000 Mar. 31 Depreciation Oct. 01 Bank (II) 5,000 I 600 II (for 6 months) 250 850 Mar. 31 Balance c/d I 5,400 II 4,750 10,150 11,000 11,000 2021 2021 Apr. 01 Balance b/d Oct. 01 Depreciation (I) (for 6 months) 270 I 5,400 Oct. 01 Bank (I) 4,000 II 4,750 10,150 Oct. 01 Profit and Loss (Loss) 1,130 2022 Mar. 31 Depreciation (II) 475 Mar. 31 Balance c/d (II) 4,275 10,150 10,150

Working Note

(1) Calculation of profit or loss on sale of machine:

 Particulars ( `) Book Value of Machinery Apr. 01, 2021 5,400 Less: Depreciation (for 6 Months) (270) Book Value of Machinery on Oct. 01 2021 5,130 Less: Sale (4,000) Loss on Sale 1,130

Question 19:

X bought a machine for  ` 25,000 on which he spent  ` 5,000 for carriage and freight.  ` 1,000 for brokerage of the middleman,  ` 3,500 for installation and  ` 500 for an iron pad. The machine is depreciated @ 10% p.a. on Written Down Value basis. After three years, the machine was sold to Y for  ` 30,500 and  ` 500 was paid as commission to the broker through whom the sale was effected. Find out the profit and loss on sale of machine.

 Books of X Machinery Account Dr. Cr. Date Particulars J.F. ( `) Date Particulars J.F. ( `) I year I year Jan.01 Bank (25,000 + 5,000 + 1,000 + 3,500 + 500) 35,000 Dec.31 Depreciation 3,500 Dec.31 Balance c/d 31,500 35,000 35,000 II year II year Jan.01 Balance b/d 31,500 Dec.31 Depreciation 3,150 Dec.31 Balance c/d 28,350 31,500 31,500 III year III year Jan.01 Balance b/d 28,350 Dec.31 Depreciation 2,835 Dec.31 Balance c/d 25,515 28,350 28,350 IV year IV year Jan.01 Balance b/d 25,515 Jan.01 Bank (30,500 – 500 brokerage) 30,000 Dec.31 Profit and Loss (Profit) 4,485 30,000 30,000

Question 20:

A company purchased a machinery for  ` 50,000 on 1st October, 2019. Another machinery costing  ` 10,000 was purchased on 1st December, 2020. On 31st March, 2022, the machinery purchased in 2019 was sold at a loss of  ` 5,000. The company charges depreciation @ 15% p.a. on Diminishing Balance Method. Accounts are closed on 31st March every year. Prepare the Machinery Account for 3 years.