Question

A company had purchased machinery for 100000 including a boiler of 10000. This machinery account for the first four years was credited for depreciation on the Reducing balance method @10%p.a.
During the fifth year,i.e., the current year the boiler becomes useless on account of damage to its parts. The damaged boiler is sold for 2000 which amount is credited to the machinery account.

Prepare Machinery Account for the current year, adjusting therein the cash received and the loss suffered on the damaged boiler and the depreciation of Machinery for the current year ?​

Answer 1

Answer:

<br> It is assumed that in the beginning of the 5th year boiler became useless on account of damage to some of its vital parts. <br> 2. Calculation of Depreciation for 5th year: <br> Balance of remaining machinery (Book Value) in the beginning of 5th year <br> = Rs 1,31,220-Rs 13,122 (Book Value of Boiler) = Rs 1,18,098 <br> Hence, Ddepreciation for the 5th year

= Rs 11,810 (to the nearest rupee).

Answer 2

Given:

Purchase of machinery - 100000

Boiler - 10000

Depreciation - 10% p.a

To find:

Machinery account

Solution:

A machinery account is a financial record used to track the value and depreciation of machinery owned by a company. The account typically includes the original purchase price of the machinery, any repairs or maintenance costs, and any depreciation expenses recorded over time.

Machinery Account

For the Current Year

Debit

Opening Balance (100000 - (10000*4)) - 64000

Depreciation for the current year (10% of the opening balance) - 6400

Loss on damaged boiler (10000 - 2000) - 8000

Credit

Cash received for the damaged boiler - 2000

Closing Balance (64000-6400-8000+2000) - 55600

Note: The above numbers are based on the assumption that the machinery has been depreciated for 4 years @10% p.a. on reducing balance method.

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