question_answer

On 1st April, 2017, the book value of machinery was Rs. 2,88,000. On 1st July, 2017, \[\frac{1}{4}\,th\] of the machinery was sold for Rs. 50,000. Depreciation is being charged @10% p.a. show the following adjustment in income and expenditure account for the year ended 31st March, 2018.

Answer:

                                                            Income and Expenditure Account Dr                                                         for the year ending 31st March, 2018                                             Cr

Expenditure	Amt (Rs.)	Income	Amt (Rs.)
To Loss on Sale of Machinery	20,200
To Depreciation	23,400

Working Notes 1.

	Amt (Rs.)
Book Value of machinery sold on 1st July, 2017 \[\left( 2,88,000\times \frac{1}{4} \right)\]	72,000
(-) Depreciation (WN 2)	(1,800)
	70,200
(-) Sale Value	(50,000)
Loss on Sale of Machinery	20200

2. Calculation of Depreciation

(i) For machinery sold \[\left( 2,88,000\times \frac{1}{4}\,\times \,\frac{10}{100}\,\times \,\frac{3}{12} \right)\]	1,800
(ii) For remaining machinery \[\left( 2,88,000\times \frac{3}{4}\,\times \,\frac{10}{100}\,\times \,1 \right)\]	21,600
Total Depreciation	23,400