CA Foundation Questions – Depreciation

  1. A purchased a machinery  for Rs. 1,30,000 on  1st April,  2019 and paid Rs. 20,000 for freight & installation charges. On 1st October, 2021 another machine was purchased for 50,000  and sold old machinery for Rs.1,00,000. The  machine  purchased  on 1st  October, 2021 was installed on 1st January, 2022.

    Under existing practice, the company is charging depreciation @ 20% p.a. on the original cost. However, from 1st April, 2021 it decided to adopt WDV method  and charge depreciation @15% p.a. You are required to prepare Machinery Account from 1st April, 2019 to 31st March, 2022.

    [2022 December – 4 Marks ]

    Profit on sale of Machine Rs. 16,750; Closing Balance of Machine: Rs.48,125

  2. The Machinery Account of a Factory showed a balance of Rs.95 Lakhs on 1st April 2020,  The Books of Accounts of the Factory are closed on 31st March every year and Depreciation is written off  @ 10%  per annum under the  Diminishing  Balance Method. On 1st September, 2020 a new machine was acquired at a cost of Rs.14 Lakhs and Rs.44,600 was incurred on the same day as installation charges for erecting the machine.  On 1st September, 2020 a machine which had cost Rs.21,87,000 on 1st April, 2018 was sold  for Rs.3, 75,000.  Another machine which had cost Rs.21,85,000  on 1st April, 2019  was scrapped on 1st September,  2020 and it realized nothing.

    Prepare the Plant and Machinery Account for the year ended 31st March, 2021. Allow the same rate of depreciation as in the past and calculate depreciation to the nearest multiple of a rupee. Also show all the necessary working notes.

    [2022 May – 10 Marks ]

    Loss on sale of 1st Machine Rs. 13,22,659; Loss on sale of Second Machine Rs.18,84,562; Closing Balance of Machine: Rs.65,46,159

  3. On 1st January, 2019 Kohinoor Transport Company purchased a Bus for Rs. 8,00,000. On 1st July, 2020 this bus was damaged due to fire and was completely destroyed and Rs. 6,00,000 were received by a cheque from the Insurance Company in full settlement on 1st October, 2020. On 1st July, 2020 another Bus was purchased by the company for Rs. 10,00,000.The Company charges Depreciation @ 20% per annum under the WDV Method. Calculate the amount of depreciation for the year ended 31st March 2021 and gain or loss on the destroyed Bus.

    [2021 December – 5 Marks ]

    Gain on sale of Bus Rs. 22,400; Amount of Depreciation: Rs.1,80,400

  4. The balance of Machinery Account of a firm on 1st April, 2020 was Rs.28,54,000. Out of this, a plant having book value of 2,16,000 as on 1st April, 2020 was sold on 1st July, 2020 for 82,000. On the same date a new plant was purchased for 4,58,000 and 22,000 was spent on its erection. On 1st November, 2020 a new machine was purchased for 5,60,000. Depreciation is written off @ 15% per annum under the diminishing balance method. Calculate the depreciation for the year ended 31st March, 2021.

    [2021 July – 4 Marks ]

    Amount of Depreciation: Rs.4,92,800

  5. M/s. Dayal Transport Company purchased 10 trucks @ Rs. 50,00,000 each on 1st July 2017. On 1st October 2019, one of the trucks is involved in an accident and is completely destroyed and 35,00,000 is received from the insurance in full settlement. On the same date, another truck is purchased by the company for the sum of Rs.60,00,000. The company writes off 20% of the original cost per annum. The company observes the calendar year as its financial year. Give the motor truck account for two years ending 31st December, 2020.

    [2021 January – 10 Marks ]

    Profit on sale of Truck Rs. 7,25,000; Closing Balance of Truck: Rs.1,80,00,000

  6. X purchased a machinery on 1st January 2017 for  Rs. 4 80,000 and spent Rs. 20,000 on its installation. On July 1, 2017 another machinery costing Rs. 2,00,000 was purchased. On 1st July, 2018 the machinery purchased on 1st January, 2017 having become scrapped and was sold for Rs. 2,90,000 and on the same date fresh machinery was purchased for Rs. 5,00,000. Depreciation is provided annually on 31st December at the rate of 10% p.a. on written down value. Prepare Machinery account for the years 2017 and 2018.

    [2019 November – 4 Marks ]

    Loss on sale of Machine Rs. 1,37,500; Closing Balance of Machine: Rs.6,46,000

  7. A Firm purchased an old Machinery for Rs. 37,000 on 1st January, 2015 and spent Rs.3,000 on its overhauling. On 1st July 2016, another machine was purchased for 10,000. On 1st July 2017, the machinery which was purchased on 1st January 2015, was sold for Rs. 28,000 and the same day a new machinery costing Rs.25,000 was purchased. On 1st July, 2018, the machine which-was purchased on 1st July, 2016 was sold for 2,000. Depreciation is charged @ 10% per annum on straight line method. The firm changed the method and adopted diminishing balance method with effect from 1st January, 2016 and the rate was increased to 15% per annum. The books are closed on 31st December every year. Prepare Machinery account for four years from 1st January, 2015.

    Loss on sale of Machine Rs. 305; Closing Balance of Machine: Rs.19,656

    [2019 May – 10 Marks ]

  8. A Plant & Machinery costing Rs. 10,00,000 is depreciated on straight line assuming 10 year working life and zero residual value, for four years. At the end of the fourth year, the machinery was revalued upwards by Rs. 40,000. The remaining useful life was reassessed at 8 years. Calculate Depreciation for the fifth year.

    [2018 November – 4 Marks ]

    Amount of Depreciation for Fifth Year: Rs.80,000