Question 27.
A company purchased on 1st July, 2015 machinery costing ₹ 30,000. It further purchased machinery on 1st January, 2016 costing ₹ 20,000 and on 1st October, 2016 costing ₹ 10,000. On 1st April, 2017, one-third of the machinery installed on 1st July, 2015 became obsolete and was sold for ₹ 3,000. The company follows financial year as accounting year.
Show how the machinery Account would appear in the books of company if depreciation is charged @ 10% p.a. on Written Down Value Method.
Answers
ired to prepare the Machinery A/c, Provision for Depreciation A/c and Machinery Disposal A/c for the year enInsurance prepaid is ₹ 5,000.
(iii) Depreciate Machinery and Furniture @ 10% and 15% p.a. respectively. Machinery included a machine which was purchased for ₹ 38,500 on 30th September, 2017.
(iv) Goods costing ₹ 10,000 were taken by the proprietor for his bills to Mr. X.
The first bill was retained by Mr. X till the date of maturity. Second bill was endorsed to his creditor Mr. Z on accepted by the latter payable at the New Bank of India. Show what entries should be passed in the books of A under each of the following circumstances:
(a) If A retained the bill till the due date and then realized it on maturity.
(b) If A discounted it with his bankers for ₹ 950.
(c) If A endorsed it to his creditor C in full settlement of his debt.
(d) If A sent it to his bankers for collection.
Also, give the necessary entries in each of the cases if the bill isgiven as an award it had been purchased from Batra electronics Delhi. what would be the the journal entry drawn by X in full settlement of a debt owing by Y amounted to ₹ 2,050. X discounts the bill on the same date with the Central Bank of India for ₹ 1,980. At maturity the bill was duly met by Y. Give the entries in the books of X and Y. Suppose the bill is dishonoured, what entries witll be passedaccepted by the latter payable at the New Bank of India. Show what entries should be passed in the books of A under each of the following circumstances:
(a) If A retained the bill till the due date and then realized it on maturity.
(b) If A discounted it with his bankers for ₹ 950.
(c) If A endorsed it to his creditor C in full settlement of his debt.
(d) If A sent it to his bankers for collection.
Also, give the necessary entries in each of the cases if the bill is
Answer: If the company follows the Written Down Value Method for calculating depreciation, the calculation would be done as follows:
July 1, 2015: Machinery worth ₹30,000 is purchased.
Depreciation for the year ending March 31, 2016 = ₹30,000 * 10% = ₹3,000
Written down value = ₹30,000 - ₹3,000 = ₹27,000
January 1, 2016: Machinery worth ₹20,000 is purchased.
Depreciation for the year ending March 31, 2016 on machinery purchased on July 1, 2015 = ₹27,000 * 10% = ₹2,700
Depreciation for the year ending March 31, 2016 on machinery purchased on January 1, 2016 = ₹20,000 * 10% = ₹2,000
Total Depreciation = ₹2,700 + ₹2,000 = ₹4,700
Written down value of machinery purchased on July 1, 2015 = ₹27,000 - ₹2,700 = ₹24,300
Written down value of machinery purchased on January 1, 2016 = ₹20,000 - ₹2,000 = ₹18,000
October 1, 2016: Machinery worth ₹10,000 is purchased.
Depreciation for the year ending March 31, 2017 on machinery purchased on July 1, 2015 = ₹24,300 * 10% = ₹2,430
Depreciation for the year ending March 31, 2017 on machinery purchased on January 1, 2016 = ₹18,000 * 10% = ₹1,800
Depreciation for the year ending March 31, 2017 on machinery purchased on October 1, 2016 = ₹10,000 * 10% = ₹1,000
Total Depreciation = ₹2,430 + ₹1,800 + ₹1,000 = ₹5,230
Written down value of machinery purchased on July 1, 2015 = ₹24,300 - ₹2,430 = ₹21,870
Written down value of machinery purchased on January 1, 2016 = ₹18,000 - ₹1,800 = ₹16,200
Written down value of machinery purchased on October 1, 2016 = ₹10,000 - ₹1,000 = ₹9,000
April 1, 2017: One-third of the machinery purchased on July 1, 2015 becomes obsolete and is sold for ₹3,000.
Machinery worth ₹30,000 / 3 = ₹10,000 is sold.
Depreciation for the year ending March 31, 2018 on machinery purchased on July 1, 2015 = ₹21,870 * 10% = ₹2,187
Depreciation for the year ending March 31, 2018 on machinery purchased on January 1, 2016 = ₹16,200 * 10% = ₹1,620
Depreciation for the year ending March 31, 2018 on machinery purchased on October 1, 2016 = ₹9,000 * 10% = ₹900
Total Depreciation = ₹2,187 + ₹1,620 + ₹900 = ₹4,707
Written down value of machinery purchased on July 1, 2015 = ₹
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