A Firm purchased an old Machinery for 37,000 on 1st January, 2015 and spent 3,000 on its overhauling. On 1st July 2016, another machine was purchas...

Question

A Firm purchased an old Machinery for 37,000 on 1st January, 2015 and spent 3,000 on its overhauling. On 1st July 2016, another machine was purchased for 10,000. On 1st July 2017, the machinery which was purchased on 1st January 2015, was sold for 28,000 and the same day a new machinery costing 25,000 was purchased. On 1st July, 2018, the machine which was R purchased on 1st July, 2016 was sold for 2,000. Depreciation is charged @ 10% per annum on straight line method. The firm changed the method and adopted diminishing balance method with effect from 1st January, 2016 and the rate was increased to 15% per annum. The books are closed on 31st December every year. Prepare Machinery account for four years from 1st January, 2015. [May 2019, 10 Marks]; [RTP Jan. 2025, Modified]

Accepted Answer

Answer Solution: Machinery Account Date Particulars Amount Date Particulars Amount 2015 Jan 1 To Bank A/ c (Ist) (3 7000+ 3000) 40,000 2015 Dec 31 By Depreciation A/ c By Balance c/ d 4,000 36,000 TOTAL 40,000 TOTAL 40,000 2016 Jan 1 July 1 To Balance b/d To Bank A/ c (IInd) 36,000 10,000 2016 Dec 31 By Depreciation A/ c 1st 5400 2nd 750 By Balance c/ d 1st 30,600 2nd 9,250 6,150 39,850 TOTAL 46,000 TOTAL 46,000 2017 Jan 1 July 1 To Balance b/d 1st 30,600 2nd 9,250 To Bank A/c (IIIrd) 39,850 25,000 2017 July 1 Dec 31 By Depreciation A/ c By Bank A/c By Profit & Loss A/c (1) By Depreciation A/ c 2nd 1388 3rd 1875 By Balance c/ d 2nd 7862 3rd 23125 2295 28000 305 3263 30987 TOTAL 64,850 TOTAL 64,850 2018 Jan 1 To Balance b/ d 2nd 7862 3rd 23125 30,987 2018 July 1 Dec 31 By Depreciation A/c By Bank A/c By Profit & Loss A/ c (2) By Depreciation Al c By Balance c/ d 590 2,000 5,272 3,469 19,656 TOTAL 30,987 TOTAL 30,987 Working Notes: (1) Calculation of Loss on 1st Machinery: Amount Balance of Machinery as on 1 Jan, 2017 30,600 Less: Depreciation upto 1 July, 2017 (30,600 x 15/100 x 6/12) 2,295 28,305 Less: Sale value of Machinery 28,000 305 (2) Calculation of Loss on 2nd Machinery: Amount Balance of Machinery as on 1 Jan, 2018 7862 Less: Depreciation upto 1 July, 2018 (7862 x 15/100 x 6/12) 590 7272 Less: Sale value of Machinery 2,000 5272

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