DEPRECIATION QUESTION WITH ANSWER QUESTION NO. 2

1.      OMTEX CLASSES
A Good – luck manufacturing Co. Ltd. Luck now purchased new machinery for Rs. 45,000 on 1^st January, 1975 and immediately spent Rs. 5,000 on its fixation and erection. In the same year on 1^st July additional machinery costing Rs. 25,000 was purchased. On 1^st July 1977 the machinery purchased on 1^st January, 1975 became obsolete and was sold for Rs. 30,000. Depreciation was provided for annually on 31^st December at the rate of 10% per annum on Fixed Instalment method. You are required to prepare Machinery Account for the period from 1975 to 1977. [F.I.M]

Working Note: calculation of depreciation

Date	Machinery 1	Machinery 2	Total depreciation
1.1.75 1.7.75 Depreciation@10%	50000 5000	25000 1250	6250
1.1.76	45000	23750
Depreciation@10%	5000	2500	7500
1.1.77	40000	21250
Depreciation@10%	2500		2500
30.6.77/1.7.77	37500
Sold	30000
	7500 Loss
Depreciation@10%		2500	2500
1.1.78		18750

M/s Good – luck Manufacturing Co. Ltd.

Machinery Account

DATE	PARTICULARS	AMOUNT	DATE	PARTICULARS	AMOUNT
1.1.75	To Cash Bank Account	45000	31.12.75	By depreciation Account	6250
1.1.75	To cash bank account	5000
1.7.75	To cash/bank account	25000	31.12.75	By balance c/d	68750
		75000			75000
1.1.76	To balance b/d	68750	31.12.76	By depreciation account	7500
			31.12.76	By balance c/d	61250
		68750			68750
1.1.77	To balance b/d	61250	1.7.77	By depreciation account	2500
			1.7.77	By cash / bank account	30000
			1.7.77	By profit / loss account	7500
			31.12.77	By depreciation account	2500
			31.12.77	By balance c/d	18750
		61250			61250
1.1.78	To balance b/d	18750