The following are the details of machineries held by a firm: Machine Purchase Date Purchase Value (₹) Useful Life Scrap Value (₹) M 1 01/04/2020…

CA Foundation · Accounting · PYQS · September 2025
The following are the details of machineries held by a firm: Machine Purchase Date Purchase Value (₹) Useful Life Scrap Value (₹) M 1 01/04/2020 11,00,000 8 years 20,000 M 2 01/04/2022 9,40,000 8 years 40,000 M 3 01/04/2024 8,10,000 5 years The firm uses 'sum of years digits' method for charging depreciation and maintains a separate account for it. On 1 st April, 2024, the M 1 machine has become obsolete and has been sold for 1,34,000/-. On the same date the estimated useful remaining life of M 2 machine is reassessed at 3 years with - 10,000 as scrap value. You are required to prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ending 31 st March, 2024 and 31 st March, 2025.

Suggested Answer and Working Notes:

Dr. Machinery Account (at original cost) Cr. Date Particulars ₹ Date Particulars ₹ 01.04.2023 To Bal b/d M 1 -11,00,000 M 2 -9,40,000 20,40,000 31.03.2024 By Balance c/d M 1 -11,00,000 M 2 -9,40,000 20,40,000 20,40,000 20,40,000 01.04.2024 To Balance b/d 20,40,000 01.04.2024 By Machinery Disposal A/c 11,00,000 01.04.2024 To Bank A/c 8,10,000 31.03.2025 By Balance c/d M 1 -9,40,000 M 2 -8,10,000 17,50,000 28,50,000 28,50,000 Dr. Provision for Depreciation Account Cr. Date Particulars ₹ Date Particulars ₹ 31.03.2024 To Balance c/d M 1 -7,80,000 M 2 -3,75,000 11,55,000 1.04.2023 By Balance b/d M 1 -6,30,000 M 2 -2,00,000 8,30,000 31.03.2024 By Depreciation A/c M 1 -1,50,000 M 2 -1,75,000 3,25,000 11,55,000 11,55,000 01.04.2024 To Machinery Disposal A/c (M 1) 7,80,000 01.04.2024 By Balance b/d M 1 -7,80,000 M 2 -3,75,000 11,55,000 31.03.2025 To Balance c/d M 2 -6,52,500 M 3 -2,70,000 9,22,500 31.03.2025 By Depreciation A/c M 2 -2,77,500 M 3 -2,70,000 5,47,500 17,02,500 17,02,500 Dr. Machinery Disposal Account Cr. Date Particulars ₹ Date Particulars ₹ 01.4.2024 To Machinery Disposal A/c 11,00,000 01.04.2024 By Provision for Depreciation A/c 7,80,000 01.04.2024 By Bank A/c 1,34,000 01.04.2024 By Profit and Loss A/c (Loss on sale of machinery) 1,86,000 11,00,000 11,00,000 Working Notes: (1) Calculation of Total of sum of digit of depreciation of Machine 1 and2from 1 st April, 2020 -31 st March, 2023 Machinery (M 1) Machinery (M 2) Cost 11,00,000 9,40,000 Depreciation (₹ 6,30,000) [₹ 10,80,000 x (₹ 8+7+6)/36] (₹ 2,00,000) [₹ 9,00,000 x 8/36] (2) Calculation of Depreciation for the year 2023-24 and2024-25 2023-2024 2024-2025 Machine 1 (M 1) 10,80,000 X 5/36 = 1,50,000 Machine 2 (M 2) 9,00,000 X 7/36 = 1,75,000 5,55,000 X 3 /6= 2,77,500 Machine 3 (M 3) 8,10,000 X 5/15 = 2,70,000 TOTAL 3,25,000 5,47,500 (3) Calculation of Depreciation on the machinery disposed 10,80,000 * (₹ 8+7+6+5)/36 = 7,80,000

Topics: Depreciation and Amortisation

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