Question 2 OR (a)
Machinery account over three years (straight line, part-year depreciation)
6 marks
- Time to write
- About 12 minutes
From an older CBCS paper
Question
Question 2 OR (a) · 6 marksOr/
- Savita bought a machine for ₹ 96,000 on 1st April 2015. She charges depreciation by the Straight Line Method and closes her books on December 31st each year. The machine's useful life is 8 years, after which it can be sold for ₹ 9,600. On May 1st 2016 she bought another machine for ₹ 54,000, with a useful life of 5 years and nil residual value. During 2017, the first machine was sold for ₹ 60,000 on June 30th, when a new machine was bought for ₹ 36,000, with a useful life of 3 years and ₹ 3,600 as residual value. Prepare the machinery account for the 3 years that end on December 31, 2017.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Prepare the machinery accountDraw the format first (heading, columns, dates), then fill in the figures from your working.
What the paper leaves open
Depreciation is charged for the months each machine is held in each calendar year.
Write it in this order
- Read the data; tick every adjustment as you plan it 1 min
- 1 Annual and part-year depreciation 2 marks 3 min
- 2 Loss on sale of Machine I 1 mark 2 min
- 3 Machinery Account for three years 3 marks 5 min
- Check: every adjustment used, both sides agree, dates in 1 min
Short on time? Step 3 carries 3 of the 6 marks: guard its minutes.
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Depreciation. Depreciation is the systematic allocation of the depreciable amount (cost less residual value) over the useful life; under the straight line (fixed instalment) method it is the same amount each year. Depreciation is charged for the months each machine is held in each calendar year (paper note).
| Machine | Cost (₹) | Residual (₹) | Life | Annual depreciation (₹) |
|---|---|---|---|---|
| I (1 April 2015) | 96,000 | 9,600 | 8 years | 10,800 |
| II (1 May 2016) | 54,000 | nil | 5 years | 10,800 |
| III (30 June 2017) | 36,000 | 3,600 | 3 years | 10,800 |
- 2015: Machine I, 9 months = ₹8,100.
- 2016: Machine I 10,800 + Machine II, 8 months 7,200 = ₹18,000.
- 2017: Machine I to 30 June, 6 months = ₹5,400; Machine II 10,800 + Machine III, 6 months 5,400 = ₹16,200.
- Machine I on 30 June 2017: 96,000 − 8,100 − 10,800 − 5,400 = ₹71,700; sold for ₹60,000: loss ₹11,700.
| Date | Dr | ₹ | Date | Cr | ₹ |
|---|---|---|---|---|---|
| 1.4.2015 | To Bank (Machine I) | 96,000 | 31.12.2015 | By Depreciation | 8,100 |
| 31.12.2015 | By Balance c/d | 87,900 | |||
| 96,000 | 96,000 | ||||
| 1.1.2016 | To Balance b/d | 87,900 | 31.12.2016 | By Depreciation (10,800 + 7,200) | 18,000 |
| 1.5.2016 | To Bank (Machine II) | 54,000 | 31.12.2016 | By Balance c/d | 1,23,900 |
| 1,41,900 | 1,41,900 | ||||
| 1.1.2017 | To Balance b/d | 1,23,900 | 30.6.2017 | By Depreciation (Machine I) | 5,400 |
| 30.6.2017 | To Bank (Machine III) | 36,000 | 30.6.2017 | By Bank (sale of Machine I) | 60,000 |
| 30.6.2017 | By Profit and Loss (loss on sale) | 11,700 | |||
| 31.12.2017 | By Depreciation (10,800 + 5,400) | 16,200 | |||
| 31.12.2017 | By Balance c/d | 66,600 | |||
| 1,59,900 | 1,59,900 |
Check: closing balance = Machine II (54,000 − 7,200 − 10,800 = 36,000) + Machine III (36,000 − 5,400 = 30,600) = ₹66,600.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Annual and part-year depreciation | 2 |
| 2 | Loss on sale of Machine I | 1 |
| 3 | Machinery Account for three years | 3 |
| Total | 6 |
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