DEPRECIATION QUESTION WITH ANSWER QUESTION NO. 3

OMTEX CLASSES

1.       A company purchased a machine worth Rs. 2,00,000 on 1^st Jan. 1976. On 1^st Jan 1977, the company purchased an additional machine for Rs. 40,000. On 1^st July 1978, the company sold the machine purchased on 1^st Jan 1977 for Rs. 32,000. Company writes off depreciation at the rate of 10% on the original cost and the accounts are closed every year on 31^st Dec. Show the Machinery Account and Depreciation Account for the three years ending 31^st Dec. 1976, 1977 and 1978 under Fixed Instalment Method. [F.I.M]

Working Note: calculation of depreciation

Date	Machinery	Machinery 2	Total depreciation
1.1.76	200000
Depreciation@10%	20000		20000
1.1.77	180000	40000
Depreciation@10%	20000	4000	24000
1.1.78	160000	36000
Depreciation@10%		2000	2000
31.6.78/1.7.78		34000
Sold		32000
		2000 Loss
Depreciation@10%	20000		20000
1.1.79	140000

M/S ______________________

MACHINERY ACCOUNT

DATE	PARTICULARS	AMOUNT	DATE	PARTICULARS	AMOUNT
1.1.76	To Cash Bank Account	200000	31.12.76	By depreciation Account	200000
			31.12.76	By balance c/d	180000
		200000			200000
1.1.77	To balance b/d	180000	31.12.77	By depreciation account	24000
1.7.77	To cash/bank account	40000	31.12.77	By balance c/d	196000
		220000			220000
1.1.78	To balance b/d	196000	1.7.78	By depreciation account	2000
			1.7.78	By cash / bank account	32000
			1.7.78	By profit / loss account	2000
			31.12.78	By depreciation account	20000
			31.12.78	By balance c/d	140000
		196000			196000
1.1.79	To balance b/d	140000