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Depreciation Basic - Problem1

The document provides examples of calculating depreciation expense using the straight line and diminishing balance (declining charge) methods over multiple periods for various assets. Under the straight line method, depreciation is calculated as total cost minus salvage value divided by estimated useful life. The diminishing balance method calculates depreciation as a percentage of the book value each period. Journal entries are provided to record depreciation expense with and without a provision for depreciation account. Ledgers and balance sheets are shown for the relevant periods.

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Pallavi Ingale
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Download as PDF, TXT or read online on Scribd
213 views

Depreciation Basic - Problem1

The document provides examples of calculating depreciation expense using the straight line and diminishing balance (declining charge) methods over multiple periods for various assets. Under the straight line method, depreciation is calculated as total cost minus salvage value divided by estimated useful life. The diminishing balance method calculates depreciation as a percentage of the book value each period. Journal entries are provided to record depreciation expense with and without a provision for depreciation account. Ledgers and balance sheets are shown for the relevant periods.

Uploaded by

Pallavi Ingale
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Straight line method

1) If a machine cost ₹ 1, 20,000 purchase by cheque as on 1-4-2018. It has a salvage value


at ₹ 20,000 and a life of 10 years, assuming the accounting year ends on 31-3-2019.
Calculate depreciation under straight line Method and pass journal entry with provision
and without provision for depreciation with necessary ledgers and draw balance sheet
abstract for first two years.

2) If a machine cost ₹ 5, 00,000 on 1-4-2017 has a salvage value at ₹ 50,000 and a life of
12 years, assuming the accounting year ends on 31-3-2019. Calculate depreciation
under straight line Method and pass journal entry with provision and without provision
for depreciation with necessary ledgers and draw balance sheet abstract for first two
years.

3) B. Brown Purchased a machine by cheque for ₹ 90,000 on1-Jan-2013. Its probable


working life was estimated 10 years and its probable scrap value at the end of that time
₹ 10,000. It was decided to write off depreciation by equal annual installment. You are
required to pass necessary Journal entries for first two years and show necessary
accounts and the balance sheet for first two year. {(Straight line Method) Both way
without provision and with provision.} [Year end at Dec 2013]

4) A company bought a machine for ₹10,000 and spent ₹2000 its installation on 1 April
2014 Estimated life of 4 years, no scrap value 4 April 2015, an additional motor of
₹9000 was fitted into the machine Expected that the useful life of the machine would
not be affected. Calculate depreciation under straight line Method and draw machine
ledgers with working note for three years i.e. up to 2016-2017. Find Book value in year
2016-17.

5) A company bought a machine for ₹ 40,000 on 1 April 2017 and paid ₹ 10, 000 on its
erection and repairs. The estimated life is 5 years, no scrap value. As on 1 April 2018,
an additional Part of motor of ₹10,000 was fitted into the machine Expected that the
useful life of the machine would not be affected. Calculate depreciation under straight
line Method and draw machine ledgers with working note for three years i.e. up to
2019-2020 also find Book value.

Declining charge method or diminishing value


method
6) If a company bought machine of ₹85,000 as on 1-4-2013 and paid Installation charges
of ₹10000 and unloading charges of ₹5000. Estimated scrap value is ₹20,000. At each
year, depreciation is provided at the rate of 10% p.a. by the diminishing balance method
and pass journal entry with provision and without provision for depreciation with
necessary ledgers and balance sheet for the first two financial year which is ending on
March 31 every year.

7) If a company bought machine of ₹4,60,000 as on 1-4-2018 and paid overhaul charges


₹20,000 and servicing of Machine done ₹20,000. Estimated scrap value is ₹10,000. At
the each year, depreciation is provided at the rate of 10% p.a. by the diminishing balance
method and pass journal entry with provision and without provision for depreciation
with necessary ledgers and balance sheet for the first two financial year which is ending
on March 31 every year.

8) Thompson Bros. Purchased machinery by cheque for ₹1,00,000 on 1-1-2013, The


estimated scrap value of the machinery is ₹ 20,000. At the end of each year, depreciation
is provided at the rate of 10% per annum by the diminishing balance method. Show
machinery account and balance sheet for the first two financial year which is ending on
Dec 31 every year.
A) When no provision for depreciation account is maintained and
B) When provision for depreciation account is maintained

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