Question

On 1st April 2015, Suman Traders purchased Machinery for ₹ 30,000. On 1st Oct. 2015, they purchased further Machinery costing ₹ 20,000. On 1st Oct. 2016, they sold the Machine purchased on 1st April 2015 for ₹ 18,000 and brought another Machine for ₹ 15,000 on the same date.

Depreciation is provided on Machinery @ 20% p.a. on the Diminishing Balance Method and the financial year closes on 31st March every year.

Prepare the Machinery Account and Depreciation Account for the year 2015-16, 2016-17, and 2017-18.

Answer 1

In the books of Suman Traders.

Working Notes:

1. Calculation of Profit or loss on sale of machine:

Original cost on 01.04.2015 = ₹ 30,000

Less: Depreciation for 2015-16 (12 months) = ₹ 6,000

W.D.V. on 01.04.2016 = ₹ 24,000

Less: Depreciation for 2016-17 (6 months) = ₹ 2,400

W.D.V. on date of sale = ₹ 21,600

Less: Selling price = ₹ 18,000

∴ Loss on sale of machine = ₹ 3,600

2. Calculation of Depreciation for 2016-17:

(a) Opening balance on 01.04.2016 = ₹ 42,000

Less: W.D.V. of machine sold on 01.04.2016 = ₹ 24,000

18,000 – 20% = ₹ 3,600

(b) Purchase of machine on 01.10.2016 – 15,000 – 20% – 6months = 3,600 + 1,500 = ₹ 5,100