M/s. Deep lakshmi purchased a second -hand machine on 1st April, 2020 for 1,60,000. Overhauling and erection charges amounted to 40,000. Another…

CA Foundation · Accounting · RTP · January 2025
M/s. Deep lakshmi purchased a second -hand machine on 1st April, 2020 for 1,60,000. Overhauling and erection charges amounted to 40,000. Another machine was purchased for 80,000 on 1 st Oct, 2020. On 1st Oct, 2022, the machine installed on 1st April, 2020 was sold for 1,00,000. Another machine for 30,000 was purchased and was installed on 31 st December, 2022. Under the existing practice the company provides depreciation @10% p.a. on original cost. However, from 1 st April, 2023 it decided to adopt WDV method and to charge depreciation @15% p.a. You are required to prepare Machinery account for the years2020 to 2024.

Suggested Answer and Working Notes:

Machinery Account in the books of M/s. Deep Lakshmi Date Particulars Amount ₹ Date Particulars Amount ₹ 1.4.2020 To Bank A/c 1,60,000 31.03.2021 By Depreciation A/c 24,000 To Bank A/c (Erection charges) 40,000 (₹ 20,000 +4,000) 1.10.2020 To Bank A/c 80,000 31.03.2021 By Balance c/d 2,56,000 (₹ 1,80,000 +76,000) 2,80,000 2,80,000 1.4.2021 To Balance b/d 2,56,000 31.03.2022 By Depreciation A/c 28,000 (₹ 20,000 +8,000) 31.03.2022 By Balance c/d 2,28,000 (₹ 1,60,000 +68,000) 2,56,000 2,56,000 1.4.2022 To Balance b/d 2,28,000 1.10.2022 By Bank A/c 1,00,000 31.12.2022 To Bank A/c 30,000 1.10.2022 By Profit and Loss A/c (Loss on Sale – W.N.1) 50,000 31.03.2023 By Depreciation A/c 18,750 (₹ 10,000 +8,000 +750) 31.03.2023 By Balance c/d 89,250 (₹ 60,000 +29,250) 2,58,000 2,58,000 1.4.2023 To Balance b/d 89,250 31.3.2024 By Depreciation A/c 13,387.5 (₹ 9,000 +4,387.5) 31.3.2024 By Balance c/d 75,862.5 (₹ 51,000 +24,862.5) 89,250 89,250 Working Notes: Book Value of machines (Straight line method) Machine I ₹ Machine II ₹ Machine III ₹ Cost 2,00,000 80,000 30,000 Depreciation for2020 -21 20,000 4,000 Written down value as on 31.03.2021 1,80,000 76,000 Depreciation for2021 -22 20,000 8,000 Written down value as on 31.03.2022 1,60,000 68,000 Depreciation for2022 -23 (Mach I -6 months) 10,000 8,000 750 Written down value as on 01.10.2022 1,50,000 Written down value as on 31.03.2023 60,000 29,250 Sale proceeds 1,00,000 Loss on sale 50,000

Topics: Depreciation and Amortisation

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