FINANCIAL ACCOUNTING
PRACTICAL PROBLEMS DEPRECIATION ACCOUNTING
FYBFM SEM I
Illustration 1:
Vijay purchased following plant and machinery on various dates: 1-1-1999 Rs. 50,000 1-7-2000 Rs. 20,000 1-10-2000 Rs. 40,000 1-4-2001 Rs. 60,000 31-12-2002 Rs. 1,00,000 On 1-7-2002 he sold the machine bought on 1-1-1999 for Rs. 40,000. He writes off depreciation on the fixed installment system. The depreciation has been estimated to be 10% per annum on the original cost. Prepare machinery account in the ledger of Vijay for the years 1999, 2000, 2001, and 2002. Illustration 2:
The books of Dev Enterprises showed a balance of Rs. 5,85,450 in Plant and machinery account on 1st January, 2001. The details of original cost of the various items in use were as follows: Year in which items were purchased Original cost Rs. 1990 or earlier 1,74,000 1991 93,000 1992 51,000 1993 to 2000 7,56,000 Further purchases of machines were Rs. 88,000 in 2001 and Rs. 54,000 in 2002. In 2001 one machine which had cost Rs. 16,500 in 1986 was sold for Rs. 350. In 2002 another machine which had cost Rs. 21,000 in 1995 was sold for Rs. 4,500. The concern writes off depreciation @ 10% on the original cost (till the balance in respect of a machine is brought to nil value). Assuming all additions additions take place on the first f irst day of the year and sales on the last day of the year, prepare the Plant and Machinery Account for 2001 and 2002. Illustration 3:
From the books of a SIFY, a limited company, following particulars regarding its Machinery a/c are available: (a) Balance on 1st January, 2002, Rs. 50,000. (b) Purchase of machinery on 1st July, 2002, Rs. 22,000. (c) Installation charges of Rs. 4,000 paid on the purchase of new machinery on 1st October, 2002; (d) Sales of machinery on 1st October, 2002, Rs. 16,000. The original cost of machinery sold was Rs. 20,000 on 1st July, 1999. (e) Machinery is depreciated @ 15% p.a. on fixed instalment method. (f) The opening balance includes Rs. 35,000 worth of machinery purchàed on 31st December, 2001; while the remaining machinery cost Rs. 5,000. Prepare machinery account for the year ended 31sf December, 2002. Illustration 5:
The machinery account in the books of MK & Co. showed a balance of Rs. 7,540, as on 1st January 2002. They purchased a new machinery of Rs. 2,200 on 1-7-2002 and sold an old machine on 1-12002 at a price of Rs. 5,000. This machine was purchased on 1-1-1999 for Rs. 7,500. MK & Co. write off depreciation @ 20% on reducing balance method. Prepare machinery account for the year 2002. Illustration 6:
Manohar & Co. purchased following plant and machineries on the dates mentioned here under: Date Rs. Date Rs. FA SHEET 06
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FINANCIAL ACCOUNTING
PRACTICAL PROBLEMS
FYBFM SEM I
1st January, 1999 5,000 1st July, 2000 4,000 1st April, 2000 2,000 1st Apr11, 2001 6,000 On 1st July, 2002 they sold the machine bought on 1st Jan. 1999 for Rs. 4,000. They write off depreciation on the Reducin Balance Method @ 20% per annum. Prepare machinery account in the ledger of Manohar & Co. for the calendar years 1999, 2000, 2001 and 2002. Illustration 7:
The accounting year of a business ends on 31st December. A machine is bought for Rs. 20,000 on 1st January, 2000. It is to be depreciated @ 20% on the written down value (i.e., reducing balance method). How would you record the provision for depreciation in the books as well as in the final accounts for 2000, 2001 and 2002. Illustration 8: A company charges depreciation on Plant and Machinery under Reducing Balance System @ 15% per annum. On 1st April, 1999 the balance in ledger stood at Rs. 4,60,000. The following particulars are given relating to Plant and Machinery durinq the four years ended 31st March, 2003.
Show the Plant and Machinery Account as it would appear in the books of the company for the four years ended 31st March, 2003 assuming depreciation is charged proportionately even if the asset is sold or destroyed. Illustration 8:
A machinery was purchased on 1st Jan. 1999 for Rs. 40,000. The accounting year ends on 31st December. Depreciation was written off @ 20% on written down value method upto 2001. It was decided to change the method of depreciation to 10% on original cost in 2002. (i) With effect from 2002 (ii) With retrospective effect (i.e., from 1999) Show the necessary accounts: Illustration 9:
A machinery was purchased at a cost of Rs. 4,00,000 and spent Rs. 40,000 on Import Duty, Rs. 25,000 on handling charges, Rs. 5,000 on entry tax and Rs 30,000 for installation. It had no scrap value and its estimated life was 10 years. Depreciation was charged on straight line method. At the end of three years the balance were: Machinery A/c Rs. 5,00,000 Accumulated Depreciation A/c Rs. 150000 During the fourth year it was decided to sell the machinery at the end of its sixth year’s life for Rs. 1,40,000. Revise the depreciation rate from the fourth year onwards and prepare Machinery Nc and Accumulated Depreciation Nc for the fourth, fifth and sixth year assuming the sale was done at the estimated price, at the end of the sixth year. FA SHEET 06
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FINANCIAL ACCOUNTING
PRACTICAL PROBLEMS
FYBFM SEM I
Illustration 10:
Emami Limited depreciates its machinery @ 10% on reducing balance. On 1-1-2002, the balance in machinery account was Rs. 97,200. On 1-7-2002, a machinery purchased on 1-1.2000 for Rs. 8,000 was sold for Rs. 4,500. A new machine was bought on the same date for Rs. 15,800. The company changed its method of depreciation to straight line method with effect from 2000 at the same rate. Show the machinery account for the year 2002 Illustration 11:
On 1st January, 1998, Builders and Construction Ltd. took on 25 years lease land in New Bombay. costing Rs. 5,00,000. Under the lease deed the vacant possession of the land was to be handed over on 31st December, 2023. The company constructed 5 buildings on the said land, the data being the following:
You are asked to compute the depreciation for the year ended 31st March, 1999 on the various assets on straight line basis.
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