Question

solve fixed installment method question is jaiprkash of jalna ,made furniture for his own use on 1st april 2002 ,for this he spent Rs 43000 on material and Rs 7000 on wages ,he estimated the life of furniture to be 12 yrs. He also estimated that its accepted scrap value at the end of life would be Rs 8000 he close his account on 31 december. every year. He sold entire furniture for Rs 45000 on 31 july 2005 show furniture A/C for four years.​

Answer 1

Annual depreciation amount by fixed installment method

$= \frac{cost of asset - scrap value}{number of years of life}$

$= \frac{43,000 + 7,000 - 8,000}{12}$

= 3,500

                                           Furniture A/c

Date    Particulars       Amount       Date                Particulars          Amount

2002                                                  2002

Apr 1   To Bank A/c      43,000        Dec 31     By Depreciation A/c       2,625*

Apr 1   To Bank A/c        7,000        Dec 31     By Balance c/f                47,375

                                     50,000                                                               50,000

2003                                                  2003

Jan 1   To Balance b/f    47,375        Dec 31     By Depreciation A/c       3,500

                                                          Dec 31     By Balance c/f                43,875

                                      47,375                                                                 47,375

2004                                                  2004

Jan 1   To Balance b/f    43,875        Dec 31     By Depreciation A/c       3,500

                                                          Dec 31     By Balance c/f                40,375

                                      43,875                                                                43,875

2005                                                  2004

Jan 1   To Balance b/f      40,375     Jul 31     By Depreciation A/c      2,042^

Jul 31  To Profit on sale    6,667      Jul 31     By Bank A/c                   45,000

                                         47,042                                                           47,042

* Depreciation calculated for 9 months (Apr to Dec)

$= 3,500 x \frac{9}{12}$

= 2,625

^ Depreciation calculated for 7 months (Jan to Jul)

$= 3,500 x \frac{7}{12}$

= 2,042