Bills of Exchange and Promissory NotesQ-7 | Bills of Exchange and Promissory NotesQuestion 4757 of 26
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A firm purchased a second-hand machinery on April 1, 2021 for 15,00,000 subsequent to which ₹ 2,00,000 were spent on its repairs and installation. On October 1, 2021 another machinery was purchased for 9,00,000 and cost of installing the machine in a new plant is ₹ 20,000. The firm also shifted the machinery purchased on April 1, 2021 to the new plant and incurred freight of 10,000. They adopted a policy of charging depreciation @ 12% per annum on diminishing balance method. On April 1, 2023 it was decided to change the method and rate of depreciation to straight line basis. On this date, the remaining useful life was assessed as 5 years for both the machines purchased with no scrap value. On October 1, 2023 the first machine become outdated and sold for 2,50,000. On the same date, another machinery was purchased for * 8,50,000. The estimated useful life of the machine is 10 years and residual value is ₹ 30,000. You are required to prepare the machinery account for the year ending March 31, 2024. [Jan. 2025, 10 Marks]

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A
B
C
D
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Correct Answer

✅ Option — Correct Option

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  • A
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  • C
  • D

Detailed Solution & Explanation

Machinery Account Date Particulars Amount Date Particulars Amount 2023- 24 Apr 1 Oct. 1 To Balance b/d: Mach. I 13, 16,480 Mach. II 7,61,024 To Bank A/c [Purchase of III Machine] 20,77,504 8,50,000 2023- 24 Oct. 1 31 Mar By Depreciation on I a/ c By Bank a/c By Profit & Loss a/c (loss) By Depreciation on a/ c: Mach. II 1,52,205 (2) Mach. III 41,000 (3) By Balance c/ d: Mach. II 6,08,819 Mach. III 8.09.000 1,31,648(3) 2,50,000 9,34,832 1,93,205 14,17,819 TOTAL 29,27,504 TOTAL 29,27,504 WORKING NOTES – I Machine Amount 1 Apr, 2021 17,00,000 31 Mar, 2022 Less: Dep. (2,04,000) 1 Apr, 2022 Balance 14,96,000 31 Mar, 2023 Less: Dep. (1,79,520) 1 April, 2023 Balance 13,16,480 1 Oct, 2023 Less: Dep. (1,31,648)(1) 11,84,832 Less: Sold (2,50,000) Loss on Sale 9,34,832 II Machine Amount 1st Oct, 2021 9,20,000 31 Mar, 2022 Less: Dep. (55,200) 1 Apr, 2022 Balance 8,64,800 31 Mar, 2023 Less: Dep. (1,03,776) 1 April, 2023 Balance 7,61,024 31st Mar 2024 Less: Dep. (1,52,205)(2) Balance 6,08,819 III Machine Amount 10 Oct, 2023 8,50,000 .31 Mar, 2024 Less: Dep. (41,000)(3) Balance 8,09,000 (1) 13,16,480 / 5 years = 2,63,296 / 2 = 1,31,648 (2) 7,61,024 / 5 years = 1,52,205 (3) 8,50,000 – 30,000 / 10 years = 82,000 / 2 = 41,000 Note:- Freight of~ 10,000 as shifting charge of machinery is not included in cost of Machinery.

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