Page 112 - DEBK-XI(2020)

Depreciation 14.13

9. A firm charged depreciation @ 20% p.a. on written down value. Machinery costing
` 1,00,000, ` 40,000 and ` 30,000 were purchased on 1st January, 2010, 1st
July, 2011 and 1st October, 2012 respectively. On 1st October, 2013, machinery
purchased on 1st July, 2011 was damaged and replaced by a new machine
costing ` 50,000. The damaged machinery was insured and an insurance claim of
` 24,800 (after adjustment of value of scrap) was admitted by the Insurance Co.
The scrap was sold for ` 2,200.
Show Machinery Account, Accumulated Depreciation Account and Machinery
Disposal Account for the year 2013.

Solution:
Dr. MACHINERY ACCOUNT Cr.
Date Particulars ` Date Particulars `
2013 2013
Jan. 1 To Balance b/d 1,70,000 Oct. 1 By Machinery Disposal A/c 40,000
(` 1,00,000 + ` 40,000 Dec. 31 By Balance c/d 1,80,000
+ ` 30,000)
Oct. 1 To Bank A/c 50,000
2,20,000 2,20,000

Dr. ACCUMULATED DEPRECIATION ACCOUNT Cr.
Date Particulars ` Date Particulars `
2013 2013
Oct. 1 To Machinery Disposal A/c 15,520 Jan. 1 By Balance b/d (WN 1 and 2) 61,500
(WN 1 and 3) Oct. 1 By Depreciation A/c 4,320
Dec. 31 To Balance c/d 68,740 Dec. 31 By Depreciation A/c 18,440
(` 10,240 + ` 5,700 + ` 2,500)
84,260 84,260
Dr. MACHINERY DISPOSAL ACCOUNT Cr.
Date Particulars ` Date Particulars `
2013 2013
Oct. 1 To Machinery A/c 40,000 Oct. 1 By Accumulated Depreciation A/c 15,520
To Gain (Profit) on Sale of Machinery A/c 2,520 By Cash A/c 2,200
(Profit and Loss A/c) (Bal. Fig.) By Insurance Company A/c 24,800
42,520 42,520
Working Notes:
1. CALCULUATION OF DEPRECIATION ON MACHINERY
Date of Purchase 1st January, 1st July, 1st October, 1st October,
2010 (`) 2011 (`) 2012 (`) 2013 (`)
Cost of Machinery 1,00,000 40,000 30,000 50,000
Depreciation for 2011 20,000 ... ... ...
WDV on 1st January, 2011 80,000 ... ... ...
Depreciation for 2011 16,000 4,000 ... ...
WDV on 1st January, 2012 64,000 36,000 ... ...
Depreciation for 2012 12,800 7,200 1,500 ...
(3 months)
WDV on 1st January, 2013 51,200 28,800 28,500 ...
Depreciation for 2013 10,240 4,320 5,700 2,500
(9 months) (3 months)