Shubhangi Trading Company of Dombivli purchased machinery for ₹86,000 on 1st Jan 2016 and immediately spent ₹4,000 on its fixation and erection. On 1st oct 2016 additional Machinery costing ₹40,000 was purchased | Prepare Machinery Account for three years and pass Journal Entries for Third year i.e. 2017-2018.

 
3. Shubhangi Trading Company of Dombivli purchased machinery for ₹86,000 on 1st Jan 2016 and immediately spent ₹4,000 on its fixation and erection. On 1st oct 2016 additional Machinery costing ₹40,000 was purchased. 

 
On 1st Oct 2017 the Machinery purchased on 1st Jan 2016 became obsolete and was sold for ₹70,000. On 1st 2017 a new Machinery was also purchased for ₹45,000 
Depreciation was provided annually on 31st March at the rate of 12% per annum on fixed instalment method.  

 

Prepare Machinery Account for three years and pass Journal Entries for Third year i.e. 2017-2018.  

Solution:

 Machinery Account

  

    

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
2016				2016
1st Jan	To cash / bank a/c		90,000	31st March	By depreciation		2,700
				31	By Balance c/d		87,300
			90,000				90,000
1st April	To Balance b/d		87,300	31st March	By Depreciation		13,200
1st Oct	To Cash / Bank		40,000	31	By Balance c/d		1,14,100
			1,27,300				1,27,300
2017				2017
1st April	To Balance c/d		1,14,100	1st Oct	By Depreciation		5,400
1st July	To Cash / Bank		45,000	1st Oct	By cash/bank A/c		70,000
				1st Oct	By Loss on sales		1,100
				31st March	By Depreciation		8,850
				31st March	By Balance c/d		73,750
			1,59,100				1,59,100

Journal entry

Date	Particulars	LF	Debit	Credit
2017
1st July	Machinery A/c Dr.		45,000
	To Cash/Bank A/c			45,000
	(Being New Machinery purchased)
1st Oct	Depreciation A/c Dr.		5,400
	To Machinery A/c			5,400
	(Being Depreciation charged @12%)
1st Oct	Cash/Bank A/c Dr.		70,000
	Loss on Sales of Machinery		1,100
	To machinery A/c			71,100
	(Being sold old machinery)
2018
31st March	Depreciation Dr.		8,850
	To Machinery A/c			8,850
	(Being Depreciation charged @12%)
31st March	Profit & Loss A/c Dr.		8,850
	To Depreciation A/c			8,850
	(Being Depreciation transferred to P&L A/c)

 

Calculation & Explanation:

1. 31st March 2016

(M1)

90,000*12%*3/12 = 2,700

2. 31st March 2017

(M1)

90,000*12% = 10,800

(M2)

40,000*12%*6/12 = 2,400

3. 1st Oct 2017

(M1)

90,000*12%*6/12 = 5,400

Loss on M1 = 71,100 (-) 70,000 = 1,100

(M2)

40,000*12% = 4,800

(M3)

45,000*12%*9/12 = 4,050

Depreciation Calculator along with month and percentage

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