Question 26.
M/s. P & Q purchased machinery for ₹ 40,000 on 1st October, 2015. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January, 2018, one-fourth of the machinery was found unsuitable and disposed off for ₹ 5,600. On the same date new machinery at a cost of ₹ 15,000 was purchased. Write up the Machinery account for the years ended 31st March, 2016, 2017 and 2018. Accounts are closed on 31st March each year.
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Explanation:
Given Question 26.
M/s. P & Q purchased machinery for ₹ 40,000 on 1st October, 2015. Depreciation is provided @ 10% p.a. on the Diminishing Balance. On 31st January, 2018, one-fourth of the machinery was found unsuitable and disposed off for ₹ 5,600. On the same date new machinery at a cost of ₹ 15,000 was purchased. Write up the Machinery account for the years ended 31st March, 2016, 2017 and 2018. Accounts are closed on 31st March each year.
Now we need to calculate the profit or loss on the sale of machinery.
Particulars 1/4 cost 3/4 cost
Original cost of machinery
as on 1st oct 2015 ¼ (40,000) = 10,000 ¾ (40000) = 30000
Less Depreciation
@ 10% for 2015 – 16 10,000 x 10% x 6/12 = 300 1500
(6 months)
Written down value
as on 1st April 2016 Balance 9500 28500
Less Depreciation @ 10%
for 2016-17 (10% of balance) 950 2850
Written down value
as on 1st April 2017 Balance 8550 25,650
Less Depreciation @10% for
2017 -18(10 months) so 10% 713
Written down value as on 31st Jan 2018 Balance 7837
Less sale value (so loss) 5600
So loss on sale will be 2237
Less Depreciation @10% for 2017-18 on ¾ th part 2565
Written down value as on 31st march 2018 23085
Machinery 2
Original cost as on 31st Jan 2018 Rs 15,000
Less Depreciation @10% per annum for
2017-18 (15,000 x 10% x 2/12) 250
Written down value as on 31st March 2018 Rs 14,750