Question

X Ltd. has imported a machine on Oct. 1, 2011 for Rs. 1,28,000, paid customs duty and freight Rs. 64,000 and incurred erection charges Rs. 48,000. Another local machinery costing Rs. 80,000 was purchased on April 1, 2012. On Oct 1, 2013 a portion of the imported machinery (value one third) got out of order and was sold for Rs. 27,840. Depreciation to be calculated at 20% p.a. on original cost basis. (SLM) Prepare Machinery Account for the first three years ending 31 March 2014.​

Answer 1

To prepare the Machinery Account for the first three years ending 31 March 2014, calculate the depreciation and record the relevant transactions. The Machinery Account includes the cost of the imported machinery, depreciation expenses, and purchase and sale of additional machinery.

Step-by-step explanation:

To prepare the Machinery Account for the first three years ending 31 March 2014, we need to calculate the depreciation and record the relevant transactions. Here is the detailed calculation:

1. First, calculate the total cost of the imported machinery. The cost of the machine is Rs. 1,28,000 + Rs. 64,000 + Rs. 48,000 = Rs. 2,40,000.
2. Calculate the depreciation for the first year. The depreciation is 20% of the original cost, which is Rs. 2,40,000 x 20% = Rs. 48,000. Record this as an expense in the Machinery Account.
3. Similarly, calculate the depreciation for the second and third years. The depreciation for the second year is Rs. 2,40,000 x 20% = Rs. 48,000. The depreciation for the third year is Rs. 2,40,000 x 20% = Rs. 48,000. Record these expenses in the Machinery Account.
4. Record the purchase of the local machinery on April 1, 2012. The cost of the machine is Rs. 80,000. Add this to the Machinery Account as a new asset.
5. On Oct 1, 2013, record the sale of the portion of the imported machinery that got out of order. The value of one-third of the imported machinery is Rs. 2,40,000 / 3 = Rs. 80,000. The sale proceeds are Rs. 27,840. Deduct this from the Machinery Account as a loss on sale.

Following these steps, you will have the Machinery Account prepared for the first three years ending 31 March 2014.