M/s Sahani Enterprises acquired a printing machine for Rs. 40,000 on July 01, 2014 and spent Rs. 5,000 on its transport and installation. Another machine for Rs. 35,000 was purchas... M/s Sahani Enterprises acquired a printing machine for Rs. 40,000 on July 01, 2014 and spent Rs. 5,000 on its transport and installation. Another machine for Rs. 35,000 was purchased on January 01, 2016. Depreciation is charged at the rate of 20% on written down value. Prepare Printing Machine account.
Understand the Problem
The question is asking us to prepare the Printing Machine account for M/s Sahani Enterprises, considering the acquisition costs, transportation expenses, and depreciation charged at 20% on the written down value.
Answer
The balance in the Printing Machine account is Rs. 56,800.
Answer for screen readers
Total value in the Printing Machine account after depreciation:
- First Machine after 2015: Rs. 28,800
- Second Machine after 2016: Rs. 28,000
Balance in Printing Machine Account = $28,800 + 28,000 = Rs. 56,800$
Steps to Solve
- Calculate Total Acquisition Cost for the First Machine
The first machine was acquired for Rs. 40,000 and transportation costs were Rs. 5,000.
Total Cost = Cost of Machine + Transportation Costs
Total Cost = $40,000 + 5,000 = Rs. 45,000$
- Calculate Depreciation for the First Machine for 2014 and 2015
Depreciation is charged at 20% on written down value.
For the first year (2014):
Depreciation = $20% \times 45,000 = Rs. 9,000$
Written Down Value at end of 2014 = $45,000 - 9,000 = Rs. 36,000$
For the second year (2015):
Depreciation = $20% \times 36,000 = Rs. 7,200$
Written Down Value at end of 2015 = $36,000 - 7,200 = Rs. 28,800$
- Calculate Total Acquisition Cost for the Second Machine
The second machine was acquired for Rs. 35,000 on January 1, 2016.
Total Cost = Rs. 35,000
- Calculate Depreciation for the Second Machine for 2016
For the first year (2016):
Depreciation = $20% \times 35,000 = Rs. 7,000$
Written Down Value at end of 2016 = $35,000 - 7,000 = Rs. 28,000$
- Prepare Printing Machine Account
Summarize all the costs and depreciation in a ledger format for the two machines.
| Date | Particulars | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|
| July 1, 2014 | First Machine Cost | 45,000 | |
| Dec 31, 2014 | Depreciation | 9,000 | |
| Dec 31, 2015 | Depreciation | 7,200 | |
| Jan 1, 2016 | Second Machine Cost | 35,000 | |
| Dec 31, 2016 | Depreciation | 7,000 |
Total value in the Printing Machine account after depreciation:
- First Machine after 2015: Rs. 28,800
- Second Machine after 2016: Rs. 28,000
Balance in Printing Machine Account = $28,800 + 28,000 = Rs. 56,800$
More Information
The total cost of the printing machines reflects the acquisition cost plus transportation. The depreciation charge reflects the decline in the value of the assets over the accounting periods, offering a clearer view of the asset's current value.
Tips
- Forgetting to include transportation costs when calculating initial costs.
- Not applying the correct depreciation rate on the updated written down value.
- Miscalculating the written down value after depreciation.
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