1.

One machine was purchased on 1-4-’08. On 1-4-’14 the opening balance of machine account is ₹ 28,000. Depreciation on machine is charged at 10 % under straight-line method. Write journal entry for depreciation on 31 -3-’15.

Answer»

Necessary computation and explanation:

1. Under straight-line method, the amount of depreciation is determined on the base of cost price of machine (i.e., asset). First of all, in this sum, cost price of machine will be ascertained.
Assume cost price of machine is ₹ 100 -Depreciation at 10% for six years (From 1-4-’08 to 31-3-.’14 = 6 years) = 100×10 / 100 × 6 = ₹ 60
∴ Book value / Balance of machine on 1-4-14 ₹ 40
As given opening balance (book value) of machine on 1-4-14 is ₹ 28,000.
If balance of machine is ₹ 40, the cost price is ₹ 100.
∴ If balance of machine is ₹ 28,000,
the cost price is (₹)
= 28,000 × 100 / 40 = ₹ 70,000
∴Cost price of machine = ₹ 70,000

2. In straight-line method, the amount of annual depreciation is calculated on the base of cost price of the asset, which is the same in every year.
Annual depreciation D = C×R / 100
= 70,000×10  /100 = ₹ 70,000

3. Journal entry of depreciation :

DateParticularsL.F.Debit
₹		Credit
₹
31-3-15Depreciation A/c Dr7,000
To Machine A/c
(Being depreciation calculated at 10% as per straight-line method.)		7,000


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