On 1 st April, 2023 Suman Limited purchased certain machinery for 60,00,000. On 1 st October, 2025, a part of the said machinery purchased on 1 st…
CA Foundation · Accounting · PYQS · May 2026
On 1 st April, 2023 Suman Limited purchased certain machinery for 60,00,000. On 1 st October, 2025, a part of the said machinery purchased on 1 st April, 2023 for 4,00,000 having become obsolete was auctioned for 2,25,000. On the same day a fresh machinery was acquired at a cost of 7,50,000 and installation charges of 40,000 were incurred in erecting it on the same date. The company has adopted the method of providing depreciation @10% per annum on the Written Down Value of the machinery. You are required to prepare (i) Machinery Account, (ii) Provision for Depreciation Account and (iii) Machinery Disposal Account in the books of Suman Limited for the period 1 st April, 2023 to 31 st March, 2026 calculating depreciation to the nearest multiple of a rupee.
Suggested Answer and Working Notes:
In the books of Suman Limited Dr. Machinery A/c (at original cost) Cr. Date Particulars ₹ Date Particulars ₹ 01.04.2023 To Bank A/c 60,00,000 31.03.2024 By Balance c/d 60,00,000 60,00,000 60,00,000 01.04.2024 To Balance b/d 60,00,000 31.03.2025 By Balance c/d 60,00,000 60,00,000 60,00,000 01.04.2025 To Balance b/d 60,00,000 01.10.2025 By Machinery Disposal A/c 4,00,000 01.10.2025 To Bank A/c (₹ 7,50,000 +40,000) 7,90,000 31.03.2026 By Balance c/d 63,90,000 67,90,000 67,90,000 Provision for Depreciation A/c Date Particulars ₹ Date Particulars ₹ 31.03.2024 To Balance c/d 6,00,000 31.03.2024 By Depreciation A/c 6,00,000 6,00,000 6,00,000 31.03.2025 To Balance c/d 11,40,000 01.04.2024 By Balance b/d 6,00,000 31.03.2025 By Depreciation A/c 5,40,000 11,40,000 11,40,000 01.10.2025 To Machinery Disposal A/c 92,200 01.04.2025 By Balance b/d 11,40,000 31.03.2026 To Balance c/d 15,57,100 01.10.2025 By Depreciation A/c 16,200 31.03.2026 By Depreciation A/c (WN - 2) 4,93,100 16,49,300 16,49,300 Machinery Disposal A/c Date Particulars Amount ₹ Date Particulars Amount ₹ 01.10.2025 To Machinery A/c 4,00,000 01.10.2025 By Provision for Depreciation A/c 92,200 01.10.2025 By Bank A/c 2,25,000 01.10.2025 By Profit and Loss A/c (Loss on sale of Machinery) (WN - 1) 82,800 4,00,000 4,00,000 Working Notes: (1) Calculation of Profit/Loss on Sale of Machinery Particulars ₹ A. Original Cost 4,00,000 B. Less: Depreciation @10% on WDV - 4,00,000 40,000 Depreciation @10% p.a on WDV - 3,60,000 36,000 Depreciation @10% p.a on WDV - 3,24,000 for6 months 16,200 (92, 200) C. Book Value as on date of Sale (A – B) 3,07,800 D. Less: Sale proceeds (₹ 2,25,000) E. Loss on Sale (C – D) 82,800 (2) Calculation of Depreciation for Current Year on Machines (other than sold) Particulars ₹ A. On Old Machines of 45,36,000 (Note 1) for1 year (10% WDV) 4,53,600 B. On New Machine of 7,90,000 for 1/2 year 39,500 4,93,100 Note 1: Calculation of Book Value of Remaining Machinery (Other than sold) Particulars ₹ Book Value as on 1 st April, 2023 (₹ 60,00,000-4,00,000) 56,00,000 Less: Depreciation (2023-24) (₹ 5,60,000) Book Value as on 1 st April, 2024 50,40,000 Less: Depreciation (2024-25) (₹ 5,04,000) Book Value as on 1 st April, 2025 45,36,000
Topics: Depreciation and Amortisation
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