Vishal Company, Dhule, purchased Machinery costing ₹60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹30,000 and on 1st July 2018, costing ₹20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹18,000. Assume that, company account closes on 31st March every year. Show Machinery Account for the first three(3) years and pass journal entries for third year, after charging depreciation at 10% p.a. on Written Down Value Method.

Practical Problems on Written Down Value Method 

2. Vishal Company, Dhule, purchased Machinery costing ₹60,000 on 1st April 2016. They purchased further Machinery on 1st October 2017, costing ₹30,000 and on 1st July 2018, costing ₹20,000. On 1st Jan 2019, one-third of the Machinery, which was purchased on 1st April 2016, became obsolete and it was sold for ₹18,000.
Assume that, company account closes on 31st March every year.
Show Machinery Account for the first three(3) years and pass journal entries for third year, after charging depreciation at 10% p.a. on Written Down Value Method.

Solution:

In the Books of Vishal Company, Dhule.

Machinery Account

Date	Particulars	JF	Amount	Date	Particulars	JF	Amount
2016				2017
1st April	To Cash/Bank A/c		60,000	31st March	By Depreciation		6,000
				31st March	By Balance c/d		54,000
			60,000				60,000
2017				2018
1st April	To Balance b/d		54,000	31st March	By Depreciation		6,900
1st Oct	To cash/Bank A/c		30,000	31st March	By balance c/d		77,100
			84,000				84,000
2018				2019
1st April	To Balance b/d		77,100	1st Jan	By Depreciation		1215
1st July	To Cash/bank A/c		20,000	1st Jan	By cash/bank A/c		18,000
1st Jan	To Profit on sale		3,015	31st March	By Depreciation		7,590
				31st March	By Balance c/d		73,310
			1,00,115				1,00,115

Journal Entry

Date	Particulars	LF	Debit	Credit
2018	Machine A/c                           Dr.		20,000
1st July	To Cash/bank A/c			20,000
	(Being purchased machinery)
2019
1st Jan	Depreciation A/c                   Dr.		1,215
	To Machine A/c			1,215
	(Being Depreciation charged)
1st Jan	Cash/Bank A/c                       Dr.		18,000
	To machine A/c			18,000
	(Being sold machine on Profit)
1st Jan	Machinery A/c                    Dr.		3,015
	To Profit on Sale			3,015
	(Being profit on sale of machine)
31st March	Depreciation A/c                  Dr.		7,590
	To Machine			7,590
	(Being Depreciation charged at 10%p.a.)
31st March	Profit & Loss A/c                  Dr.		8,805
	To Depreciation A/c			8,805
	(Being depreciation transferred to P & L A/c)

Calculation & Explanation:

1. 60,000*10% = 6,000 (31st March 2017)

2. 31st March 2018

 (M1) 54,000*10% = 5,400  

 (M2) 30,000*10%*6/12 = 1,500

3. 1st Jan 2019

  (M1) On 1st Jan 2019, one-third of the Machinery,     purchased on 1st April 2016 was sold for ₹18,000.

 

48,600*1/3 = 16,200

Depreciation: 16,200*10%*9/12 = 1,215

31st March 2019

(M1) 32,400*10% = 3,240

(M2) 28,500*10% = 2,850

(M3) 20,000*10%*9/12 = 1,500

mesothelioma Lawyer

Depreciation Calculator along with month and percentage