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 | | | 2015 | | | | Jan 1 | To Bank A/c (Ist) ( 37,000 + 3,000 ) | 40,000 | Dec 31 | By Depreciation A/c By Balance c/d | 4,000 36,000 | | | TOTAL | 40,000 | | TOTAL | 40,000 | | 2016 | | | 2016 | | | | Jan 1 | To Balance b/d | 36,000 | Dec 31 | By Depreciation A/c:         1st         2nd | 5,400 750 | | July 1 | To Bank A/c (IInd) | 10,000 | | By Balance c/d:         1st         2nd | 30,600 9,250 | | | TOTAL | 46,000 | | TOTAL | 46,000 | | 2017 | | | 2017 | | | | Jan 1 | To Balance b/d:         1st         2nd | 30,600 9,250 | July 1 | By Depreciation A/c By Bank A/c By Profit & Loss A/c (1) | 2,295 28,000 305 | | July 1 | To Bank A/c (IIIrd) | 25,000 | Dec 31 | By Depreciation A/c:         2nd         3rd | 1,388 1,875 | | | | | Dec 31 | By Balance c/d:         2nd         3rd | 7,862 23,125 | | | TOTAL | 64,850 | | TOTAL | 64,850 | | 2018 | | | 2018 | | | | Jan 1 | To Balance b/d:         2nd         3rd | 7,862 23,125 | July 1 | By Depreciation A/c By Bank A/c By Profit & Loss A/c (2) | 590 2,000 5,272 | | | | | Dec 31 | By Depreciation A/c By Balance c/d | 3,469 19,656 | | | TOTAL | 30,987 | | TOTAL | 30,987 | Working Notes: (1) Calculation of Loss on 1st Machinery: | Particulars | Amount (₹) | | :--- | ---: | | Balance of Machinery as on 1 Jan, 2017 | 30,600 | | Less: Depreciation upto 1 July, 2017 ( 30,600 × 15/100 × 6/12 ) | (2,295) | | Book value on 1 July, 2017 | 28,305 | | Less: Sale value of Machinery | (28,000) | | Loss on Sale | 305 | (2) Calculation of Loss on 2nd Machinery: | Particulars | Amount (₹) | | :--- | ---: | | Balance of Machinery as on 1 Jan, 2018 | 7,862 | | Less: Depreciation upto 1 July, 2018 ( 7,862 × 15/100 × 6/12 ) | (590) | | Book value on 1 July, 2018 | 7,272 | | Less: Sale value of Machinery | (2,000) | | Loss on Sale | 5,272 |

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