The following balances appear in the books of Dheeraj Enterprises: Machinery account as on 1-4-2021 12,00,000 Provision for depreciation account as...

Question

The following balances appear in the books of Dheeraj Enterprises: Machinery account as on 1-4-2021 12,00,000 Provision for depreciation account as on 1-4-2021 4,65,000 On 1st October 2021 the Machinery which was purchased on 1st April, 2018 for 2,00,000 was sold for ₹ 1,10,000 and on the same date another Machinery was purchased for ₹ 4,80,000. The firm has been charging depreciation @ 10% p.a. on written down value of the Machinery every year. Prepare the Machinery account, Provision for Depreciation account and Machinery disposal account for the year ending 31st March 2022. [June 2023, 10 Marks]

Accepted Answer

Answer Solution: In the Books of Dheeraj Enterprises Machinery Account | Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) | | :--- | :--- | ---: | :--- | :--- | ---: | | 2021 | | | 2021 | | | | Apr 1 | To Balance b/d:     1st     2nd | 2,00,000 10,00,000 | Oct 1 | By Machinery Disposal A/c (transfer) | 2,00,000 | | Oct 1 | To Bank A/c III (Machinery purchased) | 4,80,000 | 2022 Mar 31 | By Balance c/d:     2nd     3rd | 10,00,000 4,80,000 | | | TOTAL | 16,80,000 | | TOTAL | 16,80,000 | Provision for Depreciation Account | Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) | | :--- | :--- | ---: | :--- | :--- | ---: | | 2021 Oct 1 | To Machinery Disposal A/c 1st (transfer) ( 54,200 + 7,290 ) | 61,490 | 2021 Apr 1 | By Balance b/d:     1st     2nd | 54,200 4,10,800 | | | | | Oct 1 | By Depreciation A/c (on 1st) | 7,290 | | 2022 Mar 31 | To Balance c/d:     2nd     3rd | 4,69,720 24,000 | 2022 Mar 31 | By Depreciation A/c     II     III | 58,920 24,000 | | | TOTAL | 5,55,210 | | TOTAL | 5,55,210 | Machinery Disposal Account | Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) | | :--- | :--- | ---: | :--- | :--- | ---: | | 2021 Oct 1 | To Machinery A/c (Cost) | 2,00,000 | 2021 Oct 1 | By Provision for Depreciation A/c By Bank A/c By Profit & loss A/c (Loss on sale) | 61,490 1,10,000 28,510 | | | TOTAL | 2,00,000 | | TOTAL | 2,00,000 | Working Notes: 1. Calculation of balance in provision for depreciation of Machinery purchased on 1 April, 2018: | Particulars | Amount (₹) | | :--- | ---: | | Cost on 1 April 2018 | 2,00,000 | | Less: Dep @10% | (20,000) | | WDV as on 1 April 2019 | 1,80,000 | | Less: Dep. @ 10% | (18,000) | | WDV as on 1 April 2020 | 1,62,000 | | Less: Dep. @ 10% | (16,200) | | WDV as on 1 April 2021 | 1,45,800 | Total provision for depreciation upto 31st March, 2021 [ 20,000 + 18,000 + 16,200 ] = 54,200 2. Depreciation on machinery for 2021-22: - I = 1,45,800 × 10/100 × 6/12 = 7,290 - II = 10,00,000 - 4,10,800 = 5,89,200 × 10% = 58,920 - III = 4,80,000 × 10% × 6/12 = 24,000

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