DEPRECIATION

Straight Line Method

1. Keshav Bros. purchased a Machinery on 1 July, 2013 for 2,50,000 whose life was expected to be 10 years. Its
estimated scrap value at the end of 10 years was 10,000.
(i) Find the amount of depreciation to be charged to Profit and Loss Account every year.
(ii) Also calculate the rate on which depreciation is to be charged every year.

(Ans. Amount of Depreciation-24,000 every year, Rate of Depreciation-9.6% pa.)

2. Kartikey Bros. purchased a second-hand Machinery on 1st October, 2011 for Rs. 1,80,000 and spent Rs.
20,000 on its erection. Show the Machinery Account and Depreciation Account for three years, if the
accounts are closed on 31st December every year. The depreciation is to be charged @ 10% p.a. on Original
Cost.
(Ans. Balance of Machinery Ale-71,50,000, Amount of Depreciation each year - 20,000)
3. A Machinery was purchased by Raj Industries for 7,00,000 on 1 July, The Machinery is depreciated @ 15%
p.a. on Straight Line Method. The Machinery was sold on 1 March, 2013 for 3,50,000. You are required to
prepare Machinery Account, if the books are closed on 31st March every year.

(Ans. Loss on Sale of Machinery-1,66,250)

4. M/s Gupta & Co. purchased a Machinery for 3,20,000 on 1st July, 2010 and spent 10,000 towards carriage
and installation of the machinery. The estimated life of Machinery is 10 years, and its scrap value is
estimated to be 30,000. Prepare Machinery Account for first three years. The company charged depreciation
on Original Cost Method and closed the books on 31st December every year.

(Ans. Balance of Machinery A/c -, 2,55,000; Amount of Depreciation each year -30,000)

5. Aman Enterprises purchased a Machine on 1 April, 2010 for 6,00,000. It purchased additional machinery for
3,00,000 on 30th September, 2012 Depreciation is to be charged 10% per annum on Straight Line Method.
Assuming that the accounts are closed on 31st December every year. Prepare Plant & Machinery Account for
4 years. (Ans. Balance of Machinery A/c-7637,500)
6. Khera Bros. purchased a Machine worth 8,00,000 on 1st January, 2009. On 1st July, 2010 it purchased a new
Machine for 2,85,000 and spent 15,000 towards its carriage and ₹ installation. On 1st October, 2011 it
purchased another machine for 2,00,000. The Machine purchased on 1st July, 2010 was sold off on 31st
March, 2013 for 1,55,000. Depreciation is charged @ 15% per annum on Straight Line Method. Prepare Plant
and Machinery Account for 5 years, assuming that the books are closed on 31st March every year.
(Ans. Balance of Machinery A/c - 4,45,000; Loss on Sale of Machinery - 21,250)
7. M's Shiv Bros. purchased a Machinery for 1,80,000 on 1st January, 2010. The life of the Machine was
estimated to be 10 years with a residual value of 7,500. On 1st July, 2011 another Machinery was purchased
worth 3,00,000 with an estimated life of 9 purchased for 4,50,000 on which 30,000 were spent against
erection. The life of this year having a residual value of 30,000. On 1st October, 2012 another Machinery was
Machine was expected to be 5 years, residual value being 15,000. Depreciation is to be charged on Straight
Line Method on 31st December every year Show Machinery Account for first 4 years assuming that the
accounts are closed on 31st December (Ans. Balance of Machinery A/c -6,99,750)
8. M/s Vaibhav Enterprises purchased a machine for 6,00,000 on 1st October 2015 O 1st July 2011, it had
purchased another machine for 4,80,000. On 1st January 2013, machine which was purchased on 1st
October 2010 was sold for 2,85,000 and a same date, it had purchased another machine for 3,60,000. The
company had charged depreciation @ 10%, @15% and @20% p.a. on Straight Line Method on Machines 1,
and III respectively. Show Machine Account from the year 2010-11 to 2012-13, that the accounts are closed
on 31st March every year.
(Ans. Balance of Machinery Alc-3656 Loss on Sale of Machinery-1,80,000)
9. Harshit Bros. purchased a Machinery worth 2,40,000 on 1st April, 2010 Additional machines were purchased
on 1st July, 2011 worth 1,80,000 and on 1st October, 2011 for Rs. 90,000. On 1st January, 2012 part of
machine (purchased on 1st April, 2010 became useless and was sold for 43,500. (Original cost 80,000)
 Depreciation is charged @ 20% per annum by Fixed Instalment Method. Show the Machinery Account for
first 3 years, assuming that the accounts are closed on 31st December every year.
(Ans. Balance of Machinery A/c -2,65,500. Loss on Sale of Machinery-715
10. On 1st July, 2009 Jai Chand Bros., purchased four machines of 20,000 each. On 30 th September 2010, one
machine out of the four machines purchased on 1st July, 2009, sold for Rs. 17,000 and on 31st December,
2011, one more machine was sold for Rs. 16,000 A new machine was purchased on 30th September, 2012
for 25,000. The company has adopted the practice of providing depreciation at 10% p.a. on original cost of
machine The company closes its books on 31st March every year. You are required to prepare Machinery
Account.

(Ans. Balance of Machinery A/c-48,750; Loss on Sale of 1 Machinery – 500

Profit on Sale of II Machinery - 1,000)

Written Down Value Method

11. On April, 2011 Rana Traders purchased second hand machinery for 2,80,000 and spend Rs. 20,000 towards
its repairs. On 1st April, 2013, the machinery was disposed off for Rs. 2,10,000. Show the Machinery
Account, if the rate of depreciation is 10% by Reducing Balance Method. The books are closed on 31st March
every year.

(Ans. Loss on Sale of Machinery-Rs. 33506)

12. On 30th September, 2011 Jyoti Enterprises, purchased a machine for 3,20,000. Depreciation was charged @
10% per annum on Reducing Balance Method. The Machine was sold on 1st July, 2013 for Rs. 2,40,000. Show
the Machinery Account. The books are closed 31st March every year.
(Ans. Loss on Sale of Machinery A/c - 26,760 )
13. A Machinery was purchased for 1,50,000 on 1st January 2011. Depreciation was charged annually @ 10% on
Diminishing Balance Method. 25% of this Machinery was sold 1st October, 2012 for Rs. 30,000. Prepare
Machinery Account for 3 years, if the books closed on 31st March every year.
(Ans. Balance of Machinery A/c-88,847 Loss on Sale of Machinery-1,261)
14. Verma Traders purchased a Machinery for 6,50,000 on 1st October 2010. A part of Machinery purchased for
65,000 on 1st October 2010 became obsolete and was disposed off for Rs. 15,000 on 1st July, 2012.
Depreciation is charged @ 10% annually on written down value. Show Machinery Account for first four
years. The books being closed on 31st March every year.
(Ans. Balance of Machinery A/e-4,50,157. Loss on Sale of Machinery 39,186)
15. On Janurary 1, 2010 Plant & Machinery stood at 3,80,000 in the books of Shan & Co. It purchased a new
Machinery for Rs. 2,20,000 on 1st Oct, 2010, A part of the machine which was purchased for 1,80,000 (on 1st
January, 2008) was sold on 1st October, 2012 for 90,000. On the same day, a new Machinery was purchased
costing 1,50,000. Depreciation s provided @ 10% per annum on Diminishing Value Method. You are required
to show Machinery Account for 2010-12, if the books were closed on 31st December every year.
(Ans. Balance of Machinery A/c-4,90,727; Loss on Sale of Machinery - 19,241)
16. 16 On 1st January, 2011 Vibhu & Co. purchased two machines of 40,000 each. On 1, April, 2012 and 1st July,
2012 it purchased additional machineries for 30,000 and for 20,000 respectively. On 1st July, 2013 one of the
machines, purchased on 1st January,2011 became obsolete and sold for Rs. 21,000.Depreciation is written
off @15% p.a. on written down value method on 31st December every year. You are required to prepare
Machinery Account for first 3 years.
(Ans. Balance of Machinery A/c - 62,921 Loss on Sale of Machinery - 5,732)
17. On 1st July 2009, Mohan Bros. purchased a machine at a cost of 1,60,000. On 30th September, 2012, the
machine was sold for 70,000. You are required to prepare Machinery Account in the books of the firm
according to both Straight Line Method (SLM) and Written Down Value (WDV) Method assuming the rate of
depreciation 20% pa. The books are closed on 31st March every year.
(Ans. Profit on Sale: Straight Line Method 14,000 Loss on Sale: Written Down Value Method 8,336)
Provision For Depreciation Account
18. On 1st April 2009, Mishra Enterprises, purchased four machines of 15,000 each. On 30th June 2010, one
machine out of the four machines purchased on April 1, 2009 was sold for 6,000 and on 31st December,
 2011 one more machine was sold for 11,000. A new machine was purchased on 30th September, 2012 for
36,000. The company has adopted the practice of providing depreciation at 10% p.a. on original cost of
machines. The company closes its books on 31st March every year. You are required to prepare Machinery
Account if depreciation is accumulated on a separate account.

(Ans. Balance of Machinery A/c-66,000; Loss on Sale of I Machinery-7.125; Profit on Sale of II Machinery-125)

19. On 1.4.2012 following balances appeared in the books on M/s Chaman Lal & Company. Machinery A/c Rs.
4,00,000; Provision for Depreciation on Machinery 85,000. On 1.9.2012, a part of Machine purchased for
1,00,000 on 1.4.2009 was sold for 45,000. On the same date a new Machine costing 50,000 was purchased.
The depreciation was provided @ 10% p.a. on original cost of the asset. However, no depreciation was
charged on the asset in the year of sale. Prepare Machinery Account, Depreciation Provision Account for the
year ending 31.3.2013.
(Ans. Balance of Machinery A/c - 3,50,000; Loss on Sale of Machinery - 25,000)
20. On 1.1.2012, the following balances were appeared in the books of Kalra & Bros. :
Plant and Machinery Account Rs. 4,59,500
Provision for Depreciation a/c Rs. 1,10,390
A new machinery for ₹ 2,00,000 was purchased on 1.10.2012. On 1.11.2013 a part of the machine which
was purchased for 1,50,000 (on 1st January, 2008) was sold for 85,000, On the same day, a new machine
was purchased for Rs. 40,000. Depreciation was provided 10% per annum on Diminishing Value Method.
You are required to show Machinery Account and Provision for Depreciation Account for 2012 and 2013.
Books were closed on 31st December every year.
(Ans. Balance of Machinery-5,49,500; Provision for Depreciation A/c- 1,31,604)

Asset Disposal Account

21. M/s Anshul Traders purchased a Machine for 2,50,000 on 1st January, Machine was purchased on 1st July,
2011 for Rs. 40,000. On 1st January 2012, the 1 st Machine was sold for 95,000. Depreciation has been
charged @ 15% on Original Cost to Profit and Loss Account and credited to Depreciation Provision Account
Show
(a) Machinery Account
(b) Provision for Depreciation Account
(c) Machinery Disposal Account
(d) The effect of these transcations in the Balance Sheets as at 31.12.2011, 31.12.2012 and 31.12.2013
(Ans. Balance of Machinery A/c - 40,000 Loss on Sale of Machinery - 1,17,500)
22. On 1st January, 2010 Satbir Ltd. purchased a machine for 4,50,000 On 1st April, 2011 another machine was
purchased for 1,50,000. On 1st July, 2013 the Machine purchased on 1st January, 2010 was sold for
3,50,000. On 1st September, 2013 a new machine was purchased for 3,00,000. On 1st July, 2013 the
machine purchased on 1st April, 2011 was sold for 1,00,000. Depreciation is to be charged @ 10% per
annum on Diminishing Balance Method. The books are closed on 31st December every year. You are
required to show the following accounts for the four accounting years ending 31st December, 2013
(a) Machinery Account (b) Provision for Depreciation Account (c) Machinery Disposal Account
(Ans. Balance of Machinery A/c-3,00,000; Loss on Sale of 1" Machinery Rs. 34,750;
Loss on Sale of II Machinery-18,631)
23. On 1 April, 2011 Raman & Co. purchased five machines for 30,000 each. On April 1 2012, one machinery
(out of the five machines which were purchased on April 1, 2011) was sold for 24,500.
A new machine at a cost of 75,000 was purchased on 1 October 2012. On 1st April. 2013 one more
machinery was sold for 21,600. Depreciation at the rate of 10% on original cost of machines has been
provided and accumulated on 'Depreciation Provision Account'. The company closes its books on 31st March
every year. You are required to show of Machinery A/c, Depreciation Provision A/c and Machinery Disposal
A/c.
(Ans. Balance of Machinery A/c - 1,65,000; Loss on Sale of I Machinery-2,500
Loss on Sale of II Machinery Rs. 2,400)
24. On 1.4.2012 following balances appeared in the books on M/s Dhruv & Company Machinery A/c 1,50,000;
Provision for Depreciation on Machinery 60,000. On 1.10.2012, a part of Machinery purchased for 25,000 on
1.4.2010 was sold for Rs. 9,000 On the same date, a new Machinery costing 75,000 was purchased. The
depreciation d provided @ 10% p.a. on original cost of the asset. However no depreciation was charged on
the asset in the year of sale. Prepare Machinery Account, Machinery Disposal Account and Provision for
Depreciation on Machinery Account for the year ending 31.3.2013
(Ans. Balance of Machinery A/c - 2,00,000; Loss on Sale of Machinery-11,000)
25. On 1st July, 2011 Bhatia & Company purchased two machines of 50,000 each. On 1st April, 2012 a new
machine for Rs. 25,000 was purchased. On 1st October, 2013 one of the machines, purchased on 1st July,
2011 became obsolete and was sold for 20,500 Depreciation is written off @ 15% p.a. on written down value
method on 31st December every year. You are required to prepare Machinery Account and Provision for
Depreciation Account for the years 2011, 2012 and 2013. Also prepare Machinery Sold Account showing gain
or loss on sale of machine.
(Ans. Balance of Machinery-75,000; Loss on Sale 14,389)
26. Shri Hanumant Ltd. purchased a machine for 65,000 on 1st January, 2003. Another machine was purchased
on 1st July, 2003 for 9,550. On 1st January, 2004, the first machine was sold for 14,500. Depreciation has
been charged @ 15% on original cost to Profit and Loss Account and credited to Depreciation Provision
Account. Show:
(a) Machinery Account (b) Provision for Depreciation Account (c) Machinery Disposal Account
(d) The impact of these transactions on the Balance Sheets as at 31.12.2003, 31.12.2004 and 31.12.2005.
Deprecation A/c.
(Ans. Balance of Machinery A/c 9,550, Balance of Provision for 3,582 loss on Sale of Machinery 40,750)
27. On 1st January, 2002 Chand Lal & Co. purchased four machines for 252,000 each. On 1 Jan., 2003, one
machinery (out of the four machines which were purchased on January 1, 2002) was sold for 27,600. A new
machine at a cost of 50,000 was purchased on 1st July, 2003. On 1st January, 2004 one more machinery was
sold for 25,500. Depreciation at the rate of 10% on original cost of machines has been provided and
accumulated in 'Depreciation Provision Account'. The company closes its books on 31st December every
year.You are required to show Machinery A/c, Depreciation Provision A/c and Machinery Disposal A/c.

(Ans. Balance of Machinery A/c 1,54,000, Balance of Depreciation Provision A/c 38,700 loss on sale of 1st
Machine 19,200, loss on sale of 2nd Machine 16,100)
28. On 1.4.2004, following balances appeared in the books on M / s Bakshi & Company:
Plant and Machinery A/c Rs. 52,000
Depreciation Provision A/c Rs. 19,500.
On 1.10.2004 a part of Machinery purchased for 6,400 on 1.4.2002 was sold for 2,900. On the same date, a
new Machinery costing 21,900 was purchased. The depreciation was provided @10% p.a. on original cost of
the asset.
Prepare Plant and Machinery Account, Machinery Disposal Account and Depreciation Provision Account for
the year ending 31.3.2005.
(Ans. Balance of machinery A/c 67,500 Balance of Deprecation Provision A/c 23,875 loss on sale of
Machinery 1,900)
29. 1st January, 2001 Vishwash Ltd. purchased a machine for 1,35,000 On 1st April, 2002 another machine was
purchased for 46,000. On 1st July, 2002 the Machine purchased on 1st January, 2001 was sold for 55,000. On
1st September, 2003 a new machine was purchased for 96,500. On 1st July, 2004 the machine purchased on
1st April, 2002 was sold for 12,500. Depreciation is to be charged @ 15% per annum on Diminishing Balance
Method. The books are closed on 31st December every year. You are required to show the following
accounts for the four accounting years ending 31st December, 2004:
(a) Machinery Account
(b) Machinery Disposal Account (c) Provision for Depreciation Account
(Ans. Balance of Machinery A/c 96,500 Balance of Provision for Depreciation Ale 18,576 loss on sale of 1st
Machine 51,144 loss on sale of 2nd Machine 19,598)
30. On January 1, 2001, Plant & Machinery stood at 1,65,000 in the books of Chaudhary and Sons. A new
machine for 95,000 was purchased on 1st July, 2001. A part of the machine which was purchased for 46,500
 (on 1st January, 1999) was sold on 1st October, 2003 for 22,000. On the same day, a new machine was
purchased for 30,000. Depreciation was provided @ 10% per annum on Diminishing Value Method. You are
required to show Machinery Account till 2003, if the books were closed on 31st December every year.
(Figures may be rounded off to nearest rupee)
(Ans. Balance of Machinery A/c 1,95,180)
31. On 1.1.2003, the following balances appeared in the books of Dogra & Bros
Plant and Machinery Account 4,59,500
Provision for Depreciation Account 1,20,210

A new machinery for 1,95,000 was purchased on 1.10.2003. On 1.11.2004 a part of the machine which was
purchased for 1,60,000 (on 1st January, 1999) was sold for 295,000 On the same day, a new machine was
purchased for 36,500. Depreciation was provided @@ 10% per annum on Diminishing Value Method. You
are required to show Machinery Account and Provision for Depreciation Account for 2003 and 2004. Books
were closed on 31st December every year.

(Ans. Balance of Machinery A/c 5,31,000 Balance of Provision for Depreciation Ale 1,40,068 Profit on Sale of
Machinery 8.395)
32. In the books of Bhupender & Sons the following balances appeared as on 1.1.2003
Machinery Account 2,00,000
Provision for Depreciation Account 55,195.
A new Machinery for 80,000 was purchased on 1st July, 2003. A machine which was purchased for 60,000
(on 1st January, 1999) was sold on 1st October, 2003 for 22.500 Depreciation was provided @ 10% per
annum on Diminishing Value Method. You are required to show Machinery Account and Provision for
Depreciation Account for the year 2003. Also prepare Machinery Sold Account showing gain or loss on sale
of machinery Books were closed on 31st December every year.
(Ans. Balance of Machinery A/c 2,20,000 Balance of Provision for Depreciation A/c 49,105, loss on sale of
Machinery 13,914)
33. On 1st July, 2002 Agra & Company purchased two machines of 65,000 each. On 1st April, 2003 a new
machine for 30,000 was purchased. On 1st October, 2004 one of the machines, purchased on 1st July, 2002
became obsolete and was sold for 21,500. Depreciation is written off @ 15% p.a. on written down value
method on 31st December every year. You are required to prepare Machinery Account and Provision for
Depreciation Account for the years 2002, 2003 and 2004. Also prepare Machinery Sold Account showing gain
or loss on sale of machine.
(Ans. Balance of Machinery A/c 95,000 Balance of Provision for Depreciation Ac 24,419 loss on sale of
Machinery 23,857)