Double Entry Book Keeping Ts Grewal 2019 for Class 11 Commerce Accountancy Chapter 11 - Depreciation

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Page No 14.48:

Question 1:

Calculate the Amount of annual Depreciation and Rate of Depreciation under Straight Line Method (SLM) from the following:
Purchased a second-hand machine for ₹ 96,000, spent ₹ 24,000 on its cartage, repairs and installation, estimated useful life of machine 4 years. Estimated residual value ₹ 72,000.

Answer:

$\begin{array}{l} Amount of Annual Depreciation = \frac{Cost of Machine - Scrap Value of Machine}{Life in Years} \\ = \frac{1, 20, 000 - 72, 000}{4} = Rs 12,000 \\ Rate of Depreciation = \frac{Amount of Depreciation}{Cost of Machine} \times 100 \\ = \frac{12, 000}{1, 20, 000} \times 100 = 10 % p.a. \end{array}$

Page No 14.48:

Question 2:

On 1st April, 2016, X Ltd. purchased a machine costing ₹ 4,00,000 and spent ₹ 50,000 on its installation. The estimated life of the machinery is 10 years, after which its residual value will be ₹ 50,000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare Machinery Account for the first three years. The books are closed on 31st March every year.

Answer:

Book of X Ltd. Machinery Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2016				2017
April 01	Bank		4,00,000	Mar.31	Depreciation		40,000
April 01	Bank (Erection Expense)		50,000		Balance c/d		4,10,000
			4,50,000				4,50,000
2017				2018
April 01	Balance b/d		4,10,000	Mar.31	Depreciation		40,000
					Balance c/d		3,70,000
			4,10,000				4,10,000
2018				2019
April 01	Balance b/d		3,70,000	Mar.31	Depreciation		40,000
					Balance c/d		3,30,000
			3,70,000				3,70,000

Calculation of Depreciation:

$Depreciation p . a . = \frac{4, 00, 000 + 50, 000 - 50, 000 (Scrap Value)}{10 years} = ₹ 40, 000 p . a .$

Page No 14.48:

Question 3:

On 1st April, 2015, furniture costing ₹ 55,000 was purchased. It is estimated that its life is 10 years at the end of which it will be sold for ₹ 5,000. Additions are made on 1st April 2016 and 1st October, 2018 to the value of ₹ 9,500 and ₹ 8,400 (Residual values ₹ 500 and ₹ 400 respectively). Show the Furniture Account for the first four years, if Depreciation is written off according to the Straight Line Method.

Answer:

Furniture Account
Dr.										Cr.
Date	Particulars		J.F.	Amount (₹)	Date	Particulars		J.F.	Amount (₹)
2015					2016
April 01	Bank (F1)			55,000	March 31	Depreciation (F1)			5,000
					March 31	Balance c/d (F1)			50,000
				55,000					55,000
2016					2017
April 01	Balance b/d (F1)			50,000	March 31	Depreciation
April 01	Bank (F2)			9,500		F1	5,000
						F2	900		5,900
					March 31	Balance c/d
						F1	45,000
						F2	8,600		53,600
				59,500					59,500
2017					2018
April 01	Balance b/d				March 31	Depreciation
	F1	45,000				F1	5,000
	F2	8,600		53,600		F2	900		5,900
					March 31	Balance c/d
						F1	40,000
						F2	7,700		47,700
				53,600					53,600
2018					2019
April 01	Balance b/d				March 31	Depreciation
	F1	40,000				F1	5,000
	F2	7,700		47,700		F2	900
Oct. 01	Bank (F3)			8,400		F3	400		6,300

					March 31	Balance c/d
						F1	35,000
						F2	6,800
						F3	8,000		49,800
				56,100					56,100

Working Notes:

Page No 14.48:

Question 4:

From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2019:

1st April, 2018	:	Purchased a second-hand machinery for ₹ 40,000
1st April, 2018	:	Spent ₹ 10,000 on repairs for making it serviceable.
30th September, 2018	:	Purchased additional new machinery for ₹ 20,000.
31st December, 2018	:	Repairs and renewal of machinery ₹ 3,000.
31st March, 2019	:	Depreciate the machinery at 10% p.a.

Answer:

Machinery Account
Dr.										Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particular			J.F.	Amount (₹)
2018				2019
Apr.01	Bank (M1)		50,000	Mar.31	Depreciation
Sept 30	Bank (M2)		20,000		M1		5,000
					M2 (6 months)		1,000		6,000
				Mar.31	Balance c/d
					M1	45,000
					M2 (6 months)	19,000			64,000
			70,000						70,000

Note:

Repair and renewal made on December 31, 2018 will not be recorded in Machinery Account because, this repair was made after putting the Machinery into use.

Page No 14.48:

Question 5:

An asset was purchased for ₹ 10,500 on 1st April, 2012. The scrap value was estimated to to be ₹ 500 at the end of asset's 10 years' life. Straight Line Method of depreciation was used. The accounting year ends on 31st March every year. The asset was sold for ₹ 600 on 31st March, 2019. Calculate the following.
(i) The Depreciation expense for the year ended 31st March, 2013.
(ii) The net book value of the asset on 31st March, 2017.
(iii) The gain or loss on sale of the asset on 31st March, 2019.

Answer:

Asset Account
Dr.								Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
2012				2013
April 01	Bank		10,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		9,500
			10,500				10,500
2013				2014
April 01	Balance b/d		9,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		8,500
			9,500				9,500
2014				2015
April 01	Balance b/d		8,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		7,500
			8,500				8,500
2015				2016
April 01	Balance b/d		7,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		6,500
			7,500				7,500
2016				2017
April 01	Balance b/d		6,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		5,500
			6,500				6,500
2017				2018
April 01	Balance b/d		5,500	Mar.31	Depreciation		1,000
				Mar.31	Balance c/d		4,500
			5,500				5,500
2018				2019
April 01	Balance b/d		4,500	Mar.31	Depreciation		1,000
				Mar.31	Bank		600
				Mar.31	Profit and Loss (Loss)		2,900
			4,500				4,500

(i) Depreciation Expense for the year ended March 31, 2013 is Rs 1000

(ii) The Net Book Value of the asset on March 31, 2017 is Rs 5,500

(iii) Loss on Sale of the asset on March 31, 2019 is Rs 2,900

Page No 14.49:

Question 6:

On 1st April, 2015, A Ltd. purchased a machine for ₹ 2,40,000 and spent ₹ 10,000 on its erection. On 1st October, 2015 an additional machinery costing ₹ 1,00,000 was purchased. On 1st October, 2017, the machine purchased on 1st April, 2015 was sold for ₹ 1,43,000 and on the same date, a new machine was purchased at cost of ₹ 2,00,000.
Show the Machinery Account for the first four financial years after charging Depreciation at 5% p.a. by the Straight Line Method.

Answer:

Machinery Account

Dr.											Cr.
Date	Particulars		J.F.	Amount (₹)	Date	Particulars			J.F.	Amount (₹)
2015					2016
April 01	Bank (M1)			2,50,000	March 31	Depreciation
Oct. 01	Bank (M2)			1,00,000		M1	12,500
						M2 (6 Months)	2,500			15,000
					March 31	Balance c/d
						M1	2,37,500
						M2	97,500			3,35,000
				3,50,000						3,50,000
2016					2017
April 01	Balance b/d				March 31	Depreciation
	M1	2,37,500				M1		12,500
	M2	97,500		3,35,000		M2		5,000		17,500

					March 31	Balance c/d
						M1	2,25,000
						M2	92,500			3,17,500
				3,35,000						3,35,000
2017					2018
April 01	Balance b/d				Oct. 01	Depreciation (for 6 months)				6,250
	M1	2,25,000			Oct. 01	Bank (M1 sold)				1,43,000
	M2	92,500		3,17,500	Oct. 01	Profit and Loss (loss on sale)				75,750
					2017
July 01	Bank (M3)			2,00,000	March 31	Depreciation
						M2	5,000
						M3 (for 6 months)	5,000			10,000
					March 31	Balance c/d
						M2	87,500
						M3	1,95,000			2,82,500
				5,17,500						5,17,500
2018					2019
April 01	Balance b/d				March 31	Depreciation
	M2	87,500				M2	5,000
	M3	1,95,000		2,82,500		M3	10,000			15,000
					March 31	Balance c/d
						M2	82,500
						M3	1,85,000			2,67,500
				2,82,500						2,82,500

Working Notes:

1. Calculation of Deprecation

2. Calculation of profit or loss on sale of Machine 1

Particulars	Amount (₹)
Book Value on April 01, 2017	2,25,000
Less: Deprecation for six month	(6,250)
Book Value on Oct. 01, 2017	2,18,750
Less: Sale Proceeds	(1,43,000)
Loss on Sale of Machine	75,750

Page No 14.49:

Question 7:

A Van was purchased on 1st April, 2016 for ₹ 60,000 and ₹ 5,000 was spent on its repair and registration. On 1st October, 2017 another van was purchased for ₹ 70,000. On 1st April, 2018, the first van purchased on 1st April, 2016 was sold for ₹ 45,000 and a new van costing ₹ 1,70,000 was purchased on the same date. Show the Van Account from 2016-17 to 2018-19 on the basis of Straight Line Method, if the rate of Depreciation charged is 10% p.a. Assume that books are closed on 31st March every year.

Answer:

Van Account
Dr.											Cr.
Date	Particulars		J.F.	Amount (₹)	Date	Particulars			J.F.	Amount (₹)
2016					2017
April 01	Bank (I)			65,000	March 31	Depreciation (I)				6,500
					March 31	Balance c/d (I)				58,500
				65,000						65,000
2017					2018
April 01	Balance b/d (I)			58,500	March 31	Depreciation
Oct. 01	Bank (II)			70,000		(I)	6,500
						(II) (for 6 month)	3,500			10,000
					March 31	Balance c/d
						(I)		52,000
						(II)		66,500		1,18,500
				1,28,500						1,28,500
2018					2019
April 01	Balance b/d				April 01	Bank (I)				45,000
	(I)	52,000			April 01	Profit and Loss (Loss on Sale)				7,000
					2018
	(II)	66,500		1,18,500	March 31	Depreciation
April 01	Bank (III)			1,70,000		(II)		7,000
						(III)		17,000		24,000
					March 31	Balance c/d
						(II)		59,500
						(III)		1,53,000		2,12,500
				2,88,500						2,88,500

Working Notes

1. Calculation of Annual Depreciation

2. Calculation of profit or loss on sale of Van (I)

Particulars	Amount (₹)
Book Value on Apr. 01, 2018	52,000
Less: Sale of Van	(45,000)
Loss on Sale of Van	7,000

Page No 14.49:

Question 8:

On 1st April, 2015, Star Ltd. purchased 5 machines for ₹ 60,000 each. On 1st April, 2017, one of the machine was sold at a loss of ₹ 8,000. On 1st July, 2018, second machine was sold at a loss of ₹ 12,500. A new machine was purchased for ₹ 1,00,000 on 1st October, 2018.
Prepare Machinery Account for 4 years, assuming accounts are closed on 31st March each year and depreciation is charged @ 10% per annum as per Straight Line Method.

Answer:

Dr.	Machinery A/c						Cr.
Date		Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2015				2016
April 01		To Cash/Bank A/c (60,000 × 5)	3,00,000	March 31	By Depreciation A/c (3,00,000 × 10/100)	30,000
				March 31	By balance c/d	2,70,000

			3,00,000			3,00,000
2016				2017
April 01		To balance b/d	2,70,000	March 31	By Depreciation A/c (3,00,000 × 10/100)	30,000
				March 31	By balance c/d	2,40,000

			2,70,000			2,70,000
2017				2017
April 01		To balance b/d	2,40,000	April 01	By Bank A/c (WN1)	40,000
				April 01	By Profit & Loss A/c (Loss on sale)	8,000
				2018
				March 31	By Depreciation A/c (2,40,000 × 10/100)	24,000
					(On remaining machinery)
				March 31	By balance c/d	1,68,000

			2,40,000			2,40,000
2018				2018
April 01		To balance c/d	1,68,000	July 1	By Depreciation A/c (6,000 × 3/12)	1,500
Oct.01		To Cash/Bank A/c	1,00,000	July 1	By Bank A/c (WN2)	28,000
				July 1	By Profit & Loss A/c (Loss on Sale)	12,500
				2019
				March 31	By Depreciation A/c (On remaining	23,000
					Machinery)
					[(1,80,000 × 10/100) +
					(1,00,000 × 10/100 × 6/12)]
				March 31	By balance c/d	2,03,000

			2,68,000			2,68,000

Working Notes:

1) Calculation of Sale proceeds from Machinery sold on 1^st April, 2017
Book Value of the Machine as on 1^st April, 2017	=	(Total opening balance of Machinery on this date/5)
	=	₹ (2,40,000/5) = ₹ 48,000
Loss on Sale of Machinery	=	₹ 8,000
Sale proceeds from the Machinery	=	Book Value of the Machine as on 1^st April, 2017 – Loss on Sale
	=	₹ (48,000 – 8,000) = ₹ 40,000

2) Calculation of Sale proceeds from Machinery sold on 1^st July 2018
Book Value of the Machine as on 1^st July, 2018	=	[(Total opening balance of Machinery on this date/4) – Depreciation]
	=	₹ [(1,68,000/4) – 1,500] = ₹ 40,500
Loss on Sale of Machinery	=	₹ 12,500
Sale proceeds from the Machinery	=	Book Value of the Machine as on 1^st July, 2018 – Loss on Sale
	=	₹ (40,500 – 12,500) = ₹ 28,000

Page No 14.49:

Question 9:

A company whose accounting year is a financial year, purchased on 1st July, 2015 machinery costing ₹ 30,000.
It purchased further 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.
Show how Machinery Account would appear in the books of the company. It being given that machinery was depreciated by Fixed Instalment Method at 10% p.a. What would be the value of Machinery Account on 1st April, 2018?

Answer:

Machinery Account
Dr.														Cr.
Date	Particulars			J.F.	Amount (₹)	Date	Particulars					J.F.	Amount (₹)
2015						2016
July 01	Bank (I)				30,000	March 31	Depreciation
2015
Jan. 01	Bank (II)				20,000		I (for 9 months)				2,250
							II				500		2,750
						March 31	Balanced c/d
							I				27,750
							II				19,500		47,250
					50,000								50,000
2016						2017
April 01	Balance b/d					March 31	Depreciation
	I		27,750				I		3,000
	II		19,500		47,250		II		2,000
							III		500				5,500
Oct. 01	Bank (III)				10,000	March 31	Balance c/d
							I			24,750
							II			17,500
							III			9,500			51,750
					57,250								57,250
2017						2017
April 01	Balance b/d					April 01	Bank I(1/3^rd portion)						3,000
	I	24,750				April 01	Profit and Loss (Loss on Sale of I)						5,250
						2018
	II	17,500				March 31	Depreciation
	III	9,500			51,750		I (on 2/3^rd portion)		2,000
							II		2,000
							III		1,000				5,000
						March 31	Balance c/d
							I (on 2/3^rd portion)	14,500
							II	15,500
							III	8,500					38,500
					51,750								51,750

Working Notes

1. Calculation of Depreciation

Calculation of profit or loss on sale of 1/3^rd Portion of Machine I

Particulars	Amount (₹)
Book Value of 1/3rd portion of Machine I on April 01, 2017 (24,750 × 1/3)	8,250
Less: Sale Value	(3,000)
Loss on sale	5,250

Page No 14.50:

Question 10:

On 1st July, 2015, A Co. Ltd. purchases second-hand machinery for ₹ 20,000 and spends ₹ 3,000 on reconditioning and installing it. On 1st January, 2016, the firm purchases new machinery worth ₹ 12,000. On 30th June, 2017, the machinery purchased on 1st January, 2016, was sold for ₹ 8,000 and on 1st July, 2017, a fresh plant was installed.
Payments for this plant was to be made as follows:

1st July, 2017	₹ 5,000
30th June, 2018	₹ 6,000
30th June, 2019	₹ 5,500

Payments in 2018 and 2019 include interest of ₹ 1,000 and ₹ 500 respectively.
The company writes off 10% p.a. on the original cost. The accounts are closed every year on 31st March. Show the Machinery Account for the year ended 31st March, 2018.

Answer:

Books of A. Co. Ltd

Machinery
Dr.												Cr.
Date	Particulars		J.F.	Amount (₹)	Date	Particulars				J.F.	Amount (₹)
2015					2016
July 01	Bank (I) (20,000 + 3,000)			23,000	Mar.31	Depreciation
2016						I (for 9 months)			1,725
Jan.01	Bank (II)			12,000		II (for 3 months)			300		2,025
					Mar.31	Balance c/d
						I			21,275
						II			11,700		32,975
				35,000							35,000
2016					2017
April 01	Balance b/d				Mar.31	Depreciation
	I	21,275				I	2,300
	II	11,700		32,975		II	1,200				3,500
					Mar.31	Balance c/d
						I	18,975
						II	10,500				29,475
				32,975							32,975
2017					2017
April 01	Balance b/d				June 30	Bank (II)					8,000
	I	18,975			June 30	Depreciation (II) (for 3 months)					300
	II	10,500		29,475	June 30	Profit and Loss (Loss)					2,200
July 01	Bank (III)			5,000	2018
July 01	Creditors for plant (III)			10,000	Mar.31	Depreciation
						I		2,300
						III (on 15,000 for 8 months)		1,125			3,425
						Balance c/d
						I		16,675
						III		13,875			30,550
				44,475							44,475

Working Notes

1. Calculation of Depreciation

2. Calculation of profit on loss on sale of Machine (II)

Particulars	Amount (Rs)
Book Value of Machine (II) on April 01, 2017	10,500
Less: Depreciation for 3 Months	(300)
Book Value on June 30	10,200
Less: Sale	(8,000)
Loss on Sale	2,200

Page No 14.50:

Question 11:

On 1st April, 2016, Shivam Enterprise purchased a second-hand machinery for ₹ 52,000 and spent ₹ 2,000 on cartage, ₹ 3,000 on unloading, ₹ 2,000 on installation and ₹ 1,000 as brokerage of the middle man. It was estimated that the machinery will have a scrap value of ₹ 6,000 at the end of its useful life, which is 10 years. On 31st December 2016, repairs and renewals amounted to ₹ 2,500 were paid. On 1st October, 2018, this machine was sold for ₹ 30,600 and an amount of ₹ 600 was paid as commission to an agent. Calculate the amount of annual depreciation and rate of depreciation. Also prepare the Machinery Account for first 3 years, assuming that firm follows financial year for accounting.

Answer:

$\begin{array}{l} Amount of Depreciation = \frac{Cost of Machine - Scrap Value of Machine}{Life in Years} \\ = \frac{60, 000 (Note) - 6, 000}{10} = ₹ 5,400 \\ Rate of Depreciation = \frac{Amount of Depreciation}{Cost of Machine} \times 100 \\ = \frac{5, 400}{60, 000} \times 100 = 9 % p.a. \end{array}$

Machinery Account
Dr.				Cr.
Date	Particulars	Amount (₹)	Date		Particulars	Amount (₹)
2016			2017
Apr. 01	Bank A/c	60,000	Mar. 31		Depreciation A/c	5,400
			Mar. 31		Balance c/d	54,600
		60,000				60,000
2017			2018
Apr. 01	Balance b/d	54,600	Mar. 31		Depreciation A/c	5,400
			Mar. 31		Balance c/d	49,200

		54,600				54,600
2018			2019
Apr. 01	Balance b/d	49,200	Oct. 01		Depreciation A/c (for 6 months)	2,700
					Bank A/c (Sale)	30,000
					Profit and Loss A/c (Loss on Sale)	16,500

		49,200				49,200

Working Notes: Calculation of Profit or Loss on Sale

Particulars	Amount
Value of Machine as on Apr. 01, 2018	49,200
Less: Depreciation for 6 months	2,700
Value of M1 as on Oct. 01, 2018	46,500
Less: Sale Value	30,000
Loss on Sale	16,500

Note:

1. All the expenses incurred up to the date at which machine is put in use will be added to cost of machine.
2. The amount spent on repairs is a recurring nature expenses. So, it will not be added to Machine A/c.
3. Cost of Machine = 52,000 + 2,000 + 3,000 + 2,000 + 1,000 = Rs 60,000

Page No 14.51:

Question 12:

Modern Ltd. purchased a machinery on 1st August, 2016 for ₹ 60,000. On 1st October, 2017, it purchased another machine for ₹ 20,000 plus CGST and SGST @ 6% each. On 30th June, 2018, it sold the first machine purchased in 2016 for ₹ 38,500 charging IGST @ 12%. Depreciation is provided @ 20% p.a. on the original cost each year. Accounts are closed on 31st March every year. Prepare the Machinery Account for three years.

Answer:

Books of Modern Ltd. Machinery Account
Dr.										Cr.
Date	Particulars		J.F.	Amount (₹)	Date	Particulars		J.F.	Amount (₹)
2016					2017
Aug.01	Bank (M1)			60,000	March 31	Depreciation
						M1 (for 8 months)			8,000
					March 31	Balance c/d			52,000
				60,000					60,000
2017					2018
April 01	Balance b/d			52,000	March 31	Depreciation
Oct. 01	Bank (M2)			20,000		M1	12,000
						M2 (6 months)	2,000		14,000
					March 31	Balance c/d
						M1	40,000
						M2	18,000		58,000
				72,000					72,000
2018					2019
April 01	Balance b/d				June 30	Depreciation (M1) (for 3 months)			3,000
	M1	40,000			June 30	Bank (M1)			38,500
	M2	18,000		58,000	2018
June 30	Profit and Loss (profit)			1,500	Mar.31	Depreciation (M2)			4,000
					Mar.31	Balance c/d			14,000
				59,500					59,500

Working Notes

1. Calculation of Annual Depreciation

Particulars	Amount (₹)
Value on Apr 01, 2018	40,000
Depreciation for 3 Months	(3,000)
Value on June 30, 2018	37,000
Less: Sales Value of Machine	(38,500)
Profit on sale of Machine 1	1,500

3. Journal entries for purchase and sale with GST

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2017
Oct 01	Machinery A/c	Dr.		20,000
	Input CGST A/c	Dr.		1,200
	Input SGST A/c	Dr.		1,200
	To Bank A/c				22,400
	(Machinery purchased with CGST and SGST @ 6% each paid)

2018
Jun 30	Bank A/c	Dr.		43,120
	To Machinery A/c				38,500
	To Output IGST A/c (Machinery purchased on 1st Aug, 2015 sold with IGST @ 12%.)				4,620