Chimney Ltd. purchased a machinery on 1.4.2019 for 18,00,000. The machinery has no residual value. It was reflected in its books at - 14,40,000 on…

In the books of Chimney Ltd. Machinery A/c Date Particulars Amount Date Particulars Amount 1.4.2019 To Bank/ Vendor 18,00,000 31.3.2020 By Depreciation (W.N.1) 1,80,000 31.3.2020 By Balance c/d 16,20,000 18,00,000 18,00,000 1.4.2020 To Balance b/d 16,20,000 31.3.2021 By Depreciation 1,80,000 31.3.2021 By Balance c/d 14,40,000 16,20,000 16,20,000 1.4.2021 To Balance b/d 14,40,000 31.3.2022 By Depreciation (W.N.2) 1,94,400 1.4.2021 To Revaluation Reserve 1,15,200 31.3.2022 By Balance c/d 13,60,800 15,55,200 15,55,200 1.4.2022 To Balance b/d 13,60,800 31.3.2023 By Depreciation 1,94,400 31.3.2023 By Balance c/d 11,66,400 13,60,800 13,60,800 1.4.2023 To Balance b/d 11,66,400 1.4.2024 By Revaluation Reserve (W.N.4) 86,400 31.3.2024 By Profit and Loss A/c (W.N.5) 30,240 31.3.2024 By Depreciation (W.N.3) 1,31,220 31.3.2024 By Balance c/d 9,18,540 11,66,400 11,66,400 1.4.2024 To Balance b/d 9,18,540 31.3.2025 By Depreciation 1,31,220 31.3.2025 To Profit and Loss A/c (bal. fig.) 1,11,460 31.3.2025 By Bank A/c 8,98,780 10,30,000 10,30,000 Working Notes: 1. Calculation of useful life of machinery on 1.4.2019 Depreciation charge in 2 years = (18,00,000 – 14,40,000) = ₹ 3,60,000 Depreciation per year as per Straight Line method = 3,60,000/ 2 years = ₹ 1,80,000 Remaining useful life = ₹ 14,40,000/₹ 1,80,000 = 8 years Total useful life = 2 years + 8 years = 10 years 2. Depreciation after upward revaluation as on 1.4.2021 ₹ Book value as on 1.4.2021 14,40,000 Add:8% Upward revaluation 1,15,200 Revalued amount 15,55,200 Remaining useful life 8 years (Refer W.N.1) Depreciation on revalued amount = 15,55,200 / 8 years ₹ 1,94,400 3. Depreciation after downward revaluation as on 1.4.2023 ₹ Book value as on 1.4.2023 11,66,400 Less:10% Downward revaluation (1,16,640) Revalued amount 10,49,760 Revised useful life 8 years Depreciation on revalued amount = 10,49,760 / 8 years 1,31,220 4. Amount transferred from revaluation reserve ₹ Revaluation reserve on 1.4.2021 (A) ₹ 1,15,200 Remaining useful life 8 years Amount transferred every year (1,15,200 / 8) ₹ 14,400 Amount transferred in 2 years (14,400 x 2) (B) ₹ 28,800 Balance of revaluation reserve on 1.4.2023 (A-B) ₹ 86,400 5. Amount of downward revaluation to be charged to Profit and Loss Account ₹ Downward revaluation as on 1.4.2023 (W.N.3) 1,16,640 Less: Adjusted from Revaluation reserve (W.N.4) (86,400) Amount transferred to Profit and Loss Account 30,240