On 1 st April, 2022, LMP Co. which depreciates its machinery @10% p.a. on diminishing balance method, had - 9,72,000 to the debit of Machinery…

Alternative - 1 The question is solved based on the information given in the question by giving retrospective effect of depreciation only on the remaining machinery as on 31.03.2023 i.e. by ignoring the retrospective impact of change in the method of depreciation on the machinery disposed off. In the books of LMP Co. Machinery Account Date Particulars Amount (₹) Date Particulars Amount (₹) 01.04.22 To Balance b/d 9,72,000 01.10.22 By Depreciation on machinery sold (W.N.1) 3,240 01.10.22 To Bank 1,58,000 01.10.22 By Bank - Machinery sold 45,000 01.10.22 By Loss on sale of machinery (W.N.1) 16,560 31.03.23 By Depreciation on remaining machineries (W.N.3) 1,31,100 31.03.23 By Balance c/d 9,34,100 11,30,000 11,30,000 Working Note: 1. Calculation of amount of Depreciation, written down value and loss on sale of the part of the machinery Particulars ₹ Cost as on 01.04.2020 80,000 Less: Depreciation @10% for the year 2020 -2021 (8, 000) Written Down Value (WDV) as on 31.03.2021 or01.04.2021 72,000 Less: Depreciation @10% for the year 2021 -2022 (7, 200) Written Down Value (WDV) as on 01.04.2022 64,800 Less: Depreciation @10%for the half year till30 th September, 2022 (3, 240) Written Down Value (WDV) as on 1.10.2022 61,560 Less: Sale price of the asset sold on 01.10.2022 (45, 000) Loss on sale of Machinery sold 16,560 2. Computation of the written down value of the machinery. Particulars ₹ Cost price of Machinery as on 01.04.2020 (₹ 972000* 100/90* 100/90) 12,00,000 Less: Cost of Machinery sold 80,000 Cost of Remaining asset as on 01.04.2020 11,20,000 Less: Depreciation @10% for the year 2020 -2021 on diminishing balance method (₹ 1,12,000) Written down value of the remaining asset as on 01.04.2021 10,08,000 Less: Depreciation @10% for the year 2021 -2022 on diminishing balance method (₹ 1,00,800) Written down value of the remaining asset as on 31.03.2022 9,07,200 Total depreciation as per diminishing balance method 2,12,800 Total depreciation as per straight line method (₹ 11,20,000* 10%* 2 years) 2,24,000 Excess depreciation to be charged to profit and loss A/c (11, 200) 3. Total Depreciation to be charged to Profit and Loss Account during the year 2022 -2023 S. No. Particulars Depreciation (₹) 1. Depreciation at 10% on existing machinery on 01.4.2022 i.e. (₹ 11,20,000* 10%) 1,12,000 2. Depreciation on addition i.e.1,58,000* 10% * 1/2 7,900 3 Difference depreciation on method change (W.No.1) 11,200 Sub-total 1,31,100 4. Depreciation on machinery sold1.10.2022 3,240 Grand Total 1,34,340 Alternative - 2 The question is solved based on the information given in the question by giving retrospective effect of depreciation on all the machinery (including the machinery disposed off). In the books of LMP Co. Machinery Account Date Particulars Amount (₹) Date Particulars Amount (₹) 01.04.22 To Balance b/d 9,72,000 01.10.22 By Depreciation on machinery sold (W.N.1) 4,000 01.10.22 To Bank 1,58,000 01.10.22 By Bank -Machinery sold 45,000 01.10.22 By Loss on sale of machinery (W.N.1) 15,000 31.03.23 By Depreciation on remaining machineries (W.N.5) 1,31,900 31.03.23 By Balance c/d 9,34,100 11,30,000 11,30,000 Working Note: 1. Calculation of amount of Depreciation, written down value and loss on sale of the part of the machinery Particulars ₹ Cost as on 01.04.2020 80,000 Less: Depreciation @10% for the year 2020-2021 (on SLM) (8, 000) Written Down Value (WDV) as on 31.03.2021 or01.04.2021 72,000 Less: Depreciation @10% for the year 2021-2022 (on SLM) (8, 000) Written Down Value (WDV) as on 01.04.2022 64,000 Less: Depreciation @10%for the half year till30 th September, 2022(SLM) (4, 000) Written Down Value (WDV) as on 1.10.2022 60,000 Less: Sale price of the asset sold on 01.10.2022 (45, 000) Loss on sale of Machinery sold 15,000 2. Computation of the written down value of the machinery. Particulars ₹ Cost price of Machinery as on 01.04.2020 (₹ 972000* 100/90* 100/90) 12,00,000 Less: Cost of Machinery sold 80,000 Cost of Remaining asset as on 01.04.2020 11,20,000 80,000 Less: Depreciation @10% for the year 2020-2021 on diminishing balance method (₹ 1,12,000) 8,000 Written down value of the remaining asset as on 01.04.2021 10,08,000 72,000 Less: Depreciation @10% for the year 2021-2022 on diminishing balance method (₹ 1,00,800) 7,200 Written down value of the remaining asset as on 31.03.2022 9,07,200 64,800 Total depreciation as per diminishing balance method 2,12,800 15,200 Total depreciation as per straight line method (₹ 11,20,000* 10%* 2 years) 2,24,000 (₹ 80,000* 10%* 2 Years) 16,000 Excess depreciation to be charged to profit and loss A/c (11, 200) (800) 5. Total Depreciation to be charged to Profit and Loss Account during the year 2022 -2023 S. No. Particulars Depreciation (₹) 1. Depreciation at 10% on existing machinery on 01.4.2022 i.e. (₹ 11,20,000* 10%) 1,12,000 2. Depreciation on addition i.e.1,58,000* 10% * 1/2 7,900 3 Difference depreciation on method change (W.No.1) 12,000 Sub-total 1,31,900 4. Depreciation on machinery sold1.10.2022 4,000 Grand Total 1,35,900 Alternative - 3 The change in the method of computing depreciation is treated as a change in accounting estimate which may affect the current period only or both the current period and future periods. Accordingly, the question is solved by ignoring the retrospective effect of depreciation as mentioned in the question. In the books of LMP Co. Machinery Account Date Particulars Amount (₹) Date Particulars Amount (₹) 01.04.22 To Balance b/d 9,72,000 01.10.22 By Depreciation on machinery sold (W.N.1) 3,240 01.10.22 To Bank 1,58,000 01.10.22 By Bank - Machinery sold 45,000 01.10.22 By Loss on sale of machinery (W.N.1) 16,560 31.03.23 By Depreciation on remaining machineries (W.N.4) 98,620 31.03.23 By Balance c/d 9,66,580 11,30,000 11,30,000 Working Note: 1. Calculation of amount of Depreciation, written down value and loss on sale of the part of the machinery Particulars Amount (₹) Cost as on 01.04.2020 80,000 Less: Depreciation @10% for the year 2020-2021 (8, 000) Written Down Value (WDV) as on 31.03.2021 or01.04.2021 72,000 Less: Depreciation @10% for the year 2021-2022 (7, 200) Written Down Value (WDV) as on 01.04.2022 64,800 Less: Depreciation @10%for the half year till30 th September, 2022 (3, 240) Written Down Value (WDV) as on 1.10.2022 61,560 Less: Sale price of the asset sold on 01.10.2022 (45, 000) Loss on sale of Machinery sold 16,560 2. Computation of written down value of the remaining asset as on 01.04.2022 Particulars ₹ Total WDV of the machinery as on 01.04.2022 9,72,000 Less: WDV of the part of the machinery sold as on 01.04.2022 (64, 800) Written down value of the remaining asset as on 01.04.2022 9,07,200 3. Computation of the written down value of the machinery as on 31.03.2023 Particulars ₹ Written down value of the remaining asset as on 01.04.2022 9,07,200 Less: Depreciation @10% for the year 2022-2023 (90, 720) 8,16,480 Add: New machinery purchased on 1.10.2022 (₹ 1,50,000 +8,000) 1,58,000 Less: Depreciation for6 months @10% (7, 900) 1,50,100 Written down value of the machinery as on 31.03.2023 9,66,580 4. Total Depreciation to be charged to Profit and Loss Account during the year 2022 -2023 S. No. Particulars Depreciation (₹) 1. Depreciation at 10% on existing machinery on 01.4.2022 i.e. (₹ 9,07,200* 10%) 90,720 2. Depreciation on addition i.e.1,58,000* 10%* 1/2 7,900 Sub-Total 98,620 3. Depreciation on machinery sold1.10.2022 3,240 Grand Total 1,01,860