DEPRECIATION QUESTION WITH ANSWER QUESTION NO. 3

OMTEX CLASSES



1.       A company purchased a machine worth Rs. 2,00,000 on 1st Jan. 1976. On 1st Jan 1977, the company purchased an additional machine for Rs. 40,000. On 1st July 1978, the company sold the machine purchased on 1st Jan 1977 for Rs. 32,000. Company writes off depreciation at the rate of 10% on the original cost and the accounts are closed every year on 31st Dec. Show the Machinery Account and Depreciation Account for the three years ending 31st Dec. 1976, 1977 and 1978 under Fixed Instalment Method. [F.I.M]

Working Note: calculation of depreciation
Date
Machinery
Machinery 2
Total depreciation
1.1.76
200000


Depreciation@10%
20000

20000
1.1.77
180000
40000

Depreciation@10%
20000
4000
24000
1.1.78
160000
36000

Depreciation@10%

2000
2000
31.6.78/1.7.78

34000

Sold

32000



2000
Loss

Depreciation@10%
20000

20000
1.1.79
140000


M/S ______________________
MACHINERY ACCOUNT
DATE
PARTICULARS
AMOUNT
DATE
PARTICULARS
AMOUNT
1.1.76
To Cash Bank Account
200000
31.12.76
By depreciation Account
200000



31.12.76
By balance c/d
180000


200000


200000
1.1.77
To balance b/d
180000
31.12.77
By depreciation account
24000
1.7.77
To cash/bank account
40000
31.12.77
By balance c/d
196000


220000


220000
1.1.78
To balance b/d
196000
1.7.78
By depreciation account
2000



1.7.78
By cash / bank account
32000



1.7.78
By profit / loss account
2000



31.12.78
By depreciation account
20000



31.12.78
By balance c/d
140000


196000


196000
1.1.79
To balance b/d
140000