Question

6. On 1st April, 2013 a company purchased a plant for 6,00,000. On 1st Octobe in same year, it purchased additional plant worth 2,00,000. On 1st October, 2015, the plant purchased on 1 April, 2013 having become obsolete and sold off for 32,70,000. Depreciation is provided at 10% p. a. On original cost method on 31st March every year. Show Plant Account upto 31st March, 2017. (8) ​

Answer 1

Answer:

Balance c/d (on 31st march 2017) is 1,30,000 which is of only plant 2 (purchased on 1st October 2013)

Answer 2

Apr 1, 2013: Purchase of Plant 1 for 600,000

Oct 1, 2013: Purchase of Plant 2 for 200,000

Apr 1, 2014 - Mar 31, 2015: Depreciation on Plant 1 (60,000) and Plant 2 (20,000)

Apr 1, 2015 - Mar 31, 2016: Depreciation on Plant 1 (60,000) and Plant 2 (20,000)

Apr 1, 2016 - Mar 31, 2017: Depreciation on Plant 2 (20,000)

Oct 1, 2015: Sale of Plant 1 for 327,000

Mar 31, 2017: Plant 2 (160,000)

Total: Plant 2 (160,000)

• The plant account would show the purchase, depreciation, and disposal of the two plants purchased by the company.
• On April 1, 2013, the company purchased a plant for 600,000. On October 1 of the same year, the company purchased an additional plant for 200,000. Depreciation would be calculated on both plants each year, at a rate of 10% per year, using the original cost method.
• On October 1, 2015, the first plant became obsolete and was sold for 327,000. This amount would be credited to the plant account, reducing the total value of the assets.
• As of March 31, 2017, the value of the second plant would have decreased due to depreciation, but would still be recorded as an asset on the balance sheet. The total value of the plant account would reflect the purchase cost, depreciation, and disposal of the two plants.
• In conclusion, the plant account would show the historical transactions related to the plants, including the purchase cost, depreciation, and disposal, and would give a picture of the company's investment in fixed assets and their value over time.

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