DEPRECIATION QUESTION WITH ANSWER QUESTION NO. 2

1.      OMTEX CLASSES
A Good – luck manufacturing Co. Ltd. Luck now purchased new machinery for Rs. 45,000 on 1st January, 1975 and immediately spent Rs. 5,000 on its fixation and erection. In the same year on 1st July additional machinery costing Rs. 25,000 was purchased. On 1st July 1977 the machinery purchased on 1st January, 1975 became obsolete and was sold for Rs. 30,000. Depreciation was provided for annually on 31st December at the rate of 10% per annum on Fixed Instalment method. You are required to prepare Machinery Account for the period from 1975 to 1977. [F.I.M]

Working Note: calculation of depreciation
Date
Machinery 1
Machinery 2
Total depreciation
1.1.75
1.7.75
Depreciation@10%
50000

5000

25000
1250


6250
1.1.76
45000
23750

Depreciation@10%
5000
2500
7500
1.1.77
40000
21250

Depreciation@10%
2500

2500
30.6.77/1.7.77
37500


Sold
30000



7500
Loss


Depreciation@10%

2500
2500
1.1.78

18750


M/s Good – luck Manufacturing Co. Ltd.
Machinery Account
DATE
PARTICULARS
AMOUNT
DATE
PARTICULARS
AMOUNT
1.1.75
To Cash Bank Account
45000
31.12.75
By depreciation Account
6250
1.1.75
To cash bank account
5000



1.7.75
To cash/bank account
25000
31.12.75
By balance c/d
68750


75000


75000
1.1.76
To balance b/d
68750
31.12.76
By depreciation account
7500



31.12.76
By balance c/d
61250


68750


68750
1.1.77
To balance b/d
61250
1.7.77
By depreciation account
2500



1.7.77
By cash / bank account
30000



1.7.77
By profit / loss account
7500



31.12.77
By depreciation account
2500



31.12.77
By balance c/d
18750


61250


61250
1.1.78
To balance b/d
18750