On 1st July, 2014 Ashok Ltd purchased a machine for Rs. 1,08,000 and spent Rs. 12,000 on its installation. At the time of purchase, it was estimated that the effective commerical life of the machine will be 12 years and after 12 year, its salvage value will be Rs. 12,000. Pass necessary journal entries and prepare machinery account and depreciation account in the books of Ashok Ltd for first 3 years, if depreciation is written-off according to straight line method. The accounts are closed on 31st December, every year.

On 1st July, 2014 Ashok Ltd purchased a machine for Rs. 1,08,000 and s

1.	On 1st July, 2014 Ashok Ltd purchased a machine for Rs. 1,08,000 and spent Rs. 12,000 on its installation. At the time of purchase, it was estimated that the effective commerical life of the machine will be 12 years and after 12 year, its salvage value will be Rs. 12,000. Pass necessary journal entries and prepare machinery account and depreciation account in the books of Ashok Ltd for first 3 years, if depreciation is written-off according to straight line method. The accounts are closed on 31st December, every year.
Answer» On 1st July, 2014 Ashok Ltd purchased a machine for Rs. 1,08,000 and spent Rs. 12,000 on its installation. At the time of purchase, it was estimated that the effective commerical life of the machine will be 12 years and after 12 year, its salvage value will be Rs. 12,000. Pass necessary journal entries and prepare machinery account and depreciation account in the books of Ashok Ltd for first 3 years, if depreciation is written-off according to straight line method. The accounts are closed on 31st December, every year.