Question

Agrawal co. Acquired a machine on 1st July,2017 at a cost of 1400 a d spent 1000 on its installation. The firm writtsboff depreciation at 10% of the original cost every year. The books are closed on 31st December every year. Show the machinery account and depreciation account for the year 2017 and 2018.

Answer 1

Answer:

this is the answer which I had solved.

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Answer 2

GIVEN:  Cost of machinery acquired = 1,400; Money spent on installation = 1,000

TO FIND: Book value of machinery on 2018

SOLUTION:

• Depreciation is the normal wear and tear in the value of fixed assets.
• Depreciation is only charged on fixed assets.
• According to the question, depreciation is charged on the original cost.
• Original cost method means that depreciation is charged on the value of assets at which it is purchased.

Value of Machinery = 1,400 + 1,000

                                 = 2,400

Depreciation is written off at 10%.

Depreciation for the year 2017

2,400 × $\frac{10}{100}$ × $\frac{6}{12}$

= 120

The value of machinery at the end of 2017 is 2,280.

Depreciation for the year 2018

2,400 × $\frac{10}{100}$

= 240

The value of machinery at the end of 2018 is 2,040.

The value of machinery at the end of 2018 is 2,040