A company purchased on 1st July 2010,machinery costing Rs.30,000.It purchased further machinery on 1st January,2011,costing Rs.20,000 and on 1st October,2011, costing Rs. 10,000. On1st April,2012, the machinery installed on 1st July 2010, became obsolete and was sold for Rs.3,000.
Show the Machinery A/C for 3 yrs charging depreciation by Fixed Instalment Method at 10% per annum. Accounts are closed on 31st March every year.
Please solve it
Answers
So here depreciation is to be provided at 10% on Fixed Base Installment Method, i.e we need to calculate 10% on the purchase value and provide same depreciation every year, for 3 years. So depreciation will be as follow:
1/7/2010-->Machine1-->
First year--> RS. 2250[(30000*10%)=3000](3000*9/12)
RS. 3000(30000*10/100)
1/1/2011-->Machine2-->
RS. 2000(20000*10/100)
1/10/2011-->Machine3-->
RS. 300(10000*10/10)
Now provide this depreciation for next 3 years from the date of purchase. This will be done as follow:
Machine 1 --> Till date 31/3/2012(as we are going to sell the machinery on the 1st. Date of next financial year.
Machine 2 --> Till date 1/1/2014
Machine 3 --> Till date 1/10/2014
The machine 1 gets absolute on 1/4/12 and it is sold at RS. 3000. So depreciation is only to be provided for 2 years. So on 1/4/12 the book value of machinery will be rs. 24,750[2250+3000]. Therefore there is a loss on sale of machinery of RS. 21,750(24750-3000).