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11th | Depreciation | Question No. 5 To 8 | Ts Grewal Solution 2022-2023

Question 5:


On 1st April, 2018, 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 2019 and 1st October, 2021 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.

 ( `)

Date

Particulars

J.F.

 ( `)

2018

 

 

 

2019

 

 

 

April 01

Bank (F1)

 

55,000

March 31

Depreciation (F1)

 

5,000

 

 

 

 

March 31

Balance c/d (F1)

 

50,000

 

 

 

55,000

 

 

 

55,000

2019

 

 

 

2020

 

 

 

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

2020

 

 

 

2021

 

 

 

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

2021

 

 

 

2022

 

 

 

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:

Drepreciation on Furniture 1=55,000-5,000(Scrap Value)/10 Year=  `5,000 p.a.

Drepreciation on Furniture 2=9,500-500(Scrap Value)/10 Year=  `900 p.a.

Drepreciation on Furniture 3=8,400-400(Scrap Value)/10 Year=  `800 p.a.

Depreciation on Furniture(for 6 Month)=800×6/12= `400

 

Question 6:


From the following transactions of a concern, prepare the Machinery Account for the year ended 31st March, 2022:

1st April, 2021

:

Purchased a second-hand machinery for  ` 40,000

1st April, 2021

:

Spent  ` 10,000 on repairs for making it serviceable.

30th September, 2021

:

Purchased additional new machinery for  ` 20,000.

31st December, 2021

:

Repairs and renewal of machinery  ` 3,000.

31st March, 2022

:

Depreciate the machinery at 10% p.a.

Answer:


Machinery Account

Dr.

 

Cr.

Date

Particulars

J.F.

 ( `)

Date

Particular

J.F.

 ( `)

2021

 

 

 

2022

 

 

 

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, 2021 will not be recorded in Machinery Account because, this repair was made after putting the Machinery into use.

Question 7:


An asset was purchased for  ` 10,500 on 1st April, 2014. 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, 2021. Calculate the following.
(i) The Depreciation expense for the year ended 31st March, 2015.
(ii) The net book value of the asset on 31st March, 2019.
(iii) The gain or loss on sale of the asset on 31st March, 2021.

Answer:


Asset Account

Dr.

 

Cr.

Date

Particulars

J.F.

 ( `)

Date

Particulars

J.F.

 ( `)

2014

 

 

 

2015

 

 

 

April 01

Bank

 

10,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

9,500

 

 

 

10,500

 

 

 

10,500

2015

 

 

 

2016

 

 

 

April 01

Balance b/d

 

9,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

8,500

 

 

 

9,500

 

 

 

9,500

2016

 

 

 

2017

 

 

 

April 01

Balance b/d

 

8,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

7,500

 

 

 

8,500

 

 

 

8,500

2017

 

 

 

2018

 

 

 

April 01

Balance b/d

 

7,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

6,500

 

 

 

7,500

 

 

 

7,500

2018

 

 

 

2019

 

 

 

April 01

Balance b/d

 

6,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

5,500

 

 

 

6,500

 

 

 

6,500

2019

 

 

 

2020

 

 

 

April 01

Balance b/d

 

5,500

Mar.31

Depreciation

 

1,000

 

 

 

 

Mar.31

Balance c/d

 

4,500

 

 

 

5,500

 

 

 

5,500

2021

 

 

 

2022

 

 

 

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, 2015 is Rs 1000

(ii) The Net Book Value of the asset on March 31, 2019 is Rs 5,500

(iii) Loss on Sale of the asset on March 31, 2022 is Rs 2,900

Question 8:


On 1st April, 2018, Star Ltd. purchased 5 machines for  ` 60,000 each. On 1st April, 2020, one of the machine was sold at a loss of  ` 8,000. On 1st July, 2021, second machine was sold at a loss of  ` 12,500. A new machine was purchased for  ` 1,00,000 on 1st October, 2021.
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

 ( `)

Date

Particulars

 ( `)

2018

 

 

2019

 

 

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

2019

 

 

2020

 

 

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

2020

 

 

2020

 

 

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

 

 

 

2021

 

 

 

 

 

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

2021

 

 

2021

 

 

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

 

 

 

2022

 

 

 

 

 

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 1st April, 2020

Book Value of the Machine as on 1st April, 2020

=

(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 1st April, 2020 – Loss on Sale

 

=

 ` (48,000 – 8,000) =  ` 40,000

 

 

 

2) Calculation of Sale proceeds from Machinery sold on 1st July 2021

Book Value of the Machine as on 1st July, 2021

=

[(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 1st July, 2021 – Loss on Sale

 

=

 ` (40,500 – 12,500) =  ` 28,000

 

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