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11th Standard English Medium Accountancy Subject Depreciation Accounting Book Back 5 Mark Questions with Solution Part - I updated Book back Questions

Published on: 13/05/2022

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Questions:

Generic 5

5 x 5 = 25

A firm purchased a machine for Rs. 1,00,000 on 1-7-2015. Depreciation is written off at 20% on reducing balance method. The firm closes its books on 31^st December each year. Show the machinery account upto 31-12-2017.

Ragul purchased machinery on April 1, 2014 for Rs. 2,00,000. On 1st October 2015, a new machine costing Rs. 1,20,000 was purchased. On 30th September 2016, the machinery purchased on April 1, 2014 was sold for Rs. 1,20,000. Books of accounts are closed on 31st March and depreciation is to be provided at 10% ap.a. on straight line method. Prepare machinery account and depreciation account for the years 2014-15 to 2016-17:

On 1st April 2008, Sudha and Company purchased machinery for Rs. 64,000. To instal the machinery expenses incurred was Rs. 28,000. Depreciate machinery 10% p.a. under straight line method. On 30^th June, 2010 the worn out machinery was sold for Rs. 52,000. The books are closed on 31^st December every year. Show machinery account.

A manufacturing company purchased on 1 April, 2010, a plant and machinery for Rs. 4,50,000 and spent Rs. 50,000 on its installation. After having used it for three years, it was sold for Rs. 3,85,000. Depreciation is to be provided every year at the rate of 15% per annum on the fixed instalment method. Accounts are closed on 31^st March every year. Calculate profit or loss on sale of machinery.

From the following particulars, give journal entries for 2 years and prepare machinery account under straight line method of providing depreciation:
Machinery was purchased on 1.1.2016
Price of the machine Rs. 36,000
Freight charges Rs. 2,500
Installation charges Rs. 1,500
Life of the machine 5 years

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Answers Key:

Generic 5

5 x 5 = 25

Dr. Machinery Account Cr.
Date	Particulars	Amount Rs.	Date	Particulars	Amount Rs.
1.7.2015	To Bank A/c	1,00,000	31.12.2015	By Depreciation A/c	10,000
				\((1,00,000\times\frac{20}{100}\times\frac{6}{12})\)
			31.12.2015	By Balance c/d	90,000
		1,00,000			1,00,000
1.1.2016	To Balance b/d	90,000	31.12.2016	By Depreciation A/c	18,000
				\((90,000\times\frac{20}{100})\)
			31.12.2016	By Balance c/d	72,000
		90,000			90,000
1.1.2017	To Balance b/d	72,000	31.12.2017	By Depreciation A/c	14,400
				By Balance c/d	57,600
		72,000			72,000
1.1.2018	to Balance b/d	57,600

2015 Mar 31Calculation of profit or loss on sale of machinery
Particulars	Amount Rs
Cost of machinery (April 2014)	2,00,000
Less : Depreciation for 2014 - 15	20,000
	1,80,000
Less: Depreciation for 20 i5 - 16	20,000
	1,60,000
Less: Depreciation till the date of sale 30.09.2016	10,000
\(2,00,000\times{10\over 100}\times {6\over 12}\)
Book value on that date of sale	1,50,000
Selling price	1,20,000
Loss on sale of machinery	30,000

Dr Ledger Account Machinery Account Cr
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2014 April 1	To Bank A/c	2,00,000	2015 Mar 31	By Depreciation A/c	20,000
			Mar 31	By Balance c/d	1,80,000
		2,00,000			2,00,000
2015 April 1	To Balance b/d	1,80,000	2016 Mar 31	By Depreciation A/c	26,000
				(20,000 + 6,000)
Oct 1	To Bank A/c	1,20,000	Mar 31	By Balance c/d	2,74,000
		3,00,000			3,00,000
2016 April 1	To Balance b/d	2,74,000	2016Sep 30	By Depreciation A/c	10,000
			Sep 30	By Bank A/c	1,20,000
			Sep 30	By Profit and loss A/c	30,000
				(Loss on sale)
			2017 Mar 31	By Depreciation A/c	12,000
				By Balance c/d	1,02,000
		2,74,000			2,74,000
2017 Aprill 1	To Balance b/d	1,02,000

Dr Depreciation Account Cr
Date	Particulars	Amount Rs	Date	Particulars	Amount Rs
2015 Mar 31	To Machinery A/c	20,000	2015 Mar 31	By Profit and loss A/c	20,000
		20,000			20,000
2016 Mar 31	To Machinery A/c	26,000	2016 Mar 31	By Profit and loss A/c	26,000
		26,000			26,000
2017 Sep 30	To Machinery A/c	10,000	2017 Sep 30	By Profit and loss A/c	22,000
2017 Sep 31	To Machinery A/c	12,000
		22,000			22,000

Calculation of profit or loss on sale of machinery Particulars Amount Rs. Cost of machinery 64,000 Add: Installation charges 28,000 92,000 Less: 1^st year depreciation 31.12.2008 6,900 \(\left(92,000\times{10\over 100}\times{9\over 12}\right)\) 85,100 Less: II^nd year depreciation 31.12.2009 9,200 \(\left(92,000\times{10\over 100}\right)\) 75,900 Less: ^IIIrd year depreciation 30.6.2010 4,600 \(\left(92,000\times{10\over 100}\times{6\over 12}\right)\) Book value on the date of sale 71,300 Sales value 52,000 Loss on sale of machinery 19,300 Dr In the books of Sudha and company Machinery Account Cr Date Particulars Amount Rs. Date Particulars Amount Rs. 2008 April 1 To Bank A/c 64,000 2008 Dec 31 By Depreciation A/c 6,900 2008 April 1 To Bank A/c 28,000 Dec 31 By Balance c/d 85,100 92,000 92,000 2009 Jan 1 To Balance b/d 85,100 2009 Dec 31 By Depreciation A/c 9,200 Dec 31 By Balance c/d 75,900 85,100 85,100 2010 Jan 1 To Balance b/d 75,900 2010 June 30 By Depreciation A/c 4,600 June 30 By Bank A/c 5,2,000 June 30 By Profit and loss A/c 19,300 75,900 75,900

Calculation of profit or loss on sale of machinery
Particulars	Amount Rs.
Cost price	4,50,000
Add : Installation charges	50,000
	5,00,000
Less : Depreciation for 2010 - 11	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
	4,25,000
Less: Depreciation for 2011 - 12	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
	3,50,000
Less: Depreciation for. 2012 - 13	75,000
\(\left(5,00,000\times{15\over 100}\right)\)
Book value on the date of sale	2,75,000
Less: Selling price	3,85,000
Profit on sale	1,10,000

The selling price is more than the book value on the date of sale of machinery. Hence, the difference 1,10,000 is profit on sale of machinery.

Amount of depreciation per year \(=\frac{\text { Original cost }}{\text { Estimates useful life }}\)
\(={40,000\over 5} =Rs.8,000\)
Rate of Depreciation per year = \({Amount\ of\ depreciation\over Original\ Cost}\times100\)
\(={8,000\over 40,000}\times 100=20\%\)
(Note : Cost of the asset = Purchase price +Transportation cost + Installation cost,
= 36,000 + 2,500 + 1,500 = Rs.40,000)
Amount of depreciation: Rs. 8,000; Balance in machinery A/c: Rs. 24,000)

Journal entries
Date	Particulars		Debit Rs.	Credit Rs.
2016 January 1	Machinery A/c	Dr	36,000	36,000
	To Bank A/c			36,000
	(Machinery bought)
January 1	Machinery A/c	Dr	4,000
	To Bank A/c			4,000
	(Transportation and installation cost incurred on purchase of machinery)
December 31	Depreciation A/c	Dr	8,000
	To Machinery a/C			8,000
	(Depreciation provided)
December 31	Profit and loss A/c	Dr	8,000
	To Depreciation A/c			8,000
	(Depreciation transferred to profit and loss amount)
2017 December 31	Depreciation A/c	Dr	8,000
	To-Machinery A/c			8,000
	(Depreciation provided)
December 31	Profit and loss A/c	Dr	8,000
	To Depreciation A/c			8,000
	(Depreciation transferred to profit and loss account)

Dr Ledger Account Machinery Account Cr
Date	Particulars	Amount Rs.	Date	Particulars	Amount Rs.
2016 Jan 1	To Bank A/c	36,000	2016 Dee 31	By Depreciation A/c	8,000
Jan I	To Bank A/c	4,000	Dec 31	By Balance c/d	32,000
		40,000			40,000
2017 Jan 1	To Balance b/d	32,000	2017 Dec 31	By Depreciation A/c	8,000
			Dec 31	By Balance c/d	24,000
		32,000			32,000
2018 Jan 1	To Balance b/d	24,000