Question 14.
Following balances appear in the books of Rama Bros:
On 1st April, 2015, they decided to sell a machine for ₹ 8,700. This machine was purchased for ₹ 16,000 in April, 2011. Prepare the Provision for Depreciation Account and Machinery Account on 31st March, 2016, assuming the firm has been charging Depreciation at 10% p.a. on Straight Line Method.
Answers
Machinery A/c and Provision for Depreciation A/c
Explanation:
In the Books of Rama Bros.
Machinery A/c
Particulars Amount(Rs.) Particulars Amount(Rs.)
1.4.15 To Bal b/d 80000 1.4.15 By Prov. for Dep. 6400
(W.N 1) By Bank A/c 8700
By P&L A/c 900
31.3.16 By Bal c/d 64000
Provision for Depreciation A/c
Particulars Amount(Rs.) Particulars Amount(Rs.)
1.4.15 To Mach A/c 6400 1.4.15 By Bal b/d 36000
To Bal c/d 36000 31.3.16 By Dep. A/c 6400
*Working Notes:
1)Calculation of Cost of Machinery
Cost of Machinery = Rs.64000 + Rs.16000
= Rs.80000
2)Calculation of Book value of Machinery Sold
Machinery Purchased Rs.16000
Less:Accumulated Depreciation(4 years) (Rs.6400)
Book Value on 1.4.15 Rs.9600
3)Calculation of Profit or Loss on Sale of Machinery
Book value of Machinery as on 1.4.15 Rs.9600
Less: Sales Value (Rs.8700)
Loss on Sale of Machinery Rs.900