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Verma traders bought a machinery on 1st April 2012 for rs 11900 and spent rs 1500 on it's establishment. The estimated life of machine is five years. After which is residual value is estimated 1400?
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Verma traders bought a machinery on 1st April 2012 for rs 11900 and sp...
Calculation of Depreciation


  • The cost of the machine is Rs 11900.

  • The cost of its establishment is Rs 1500.

  • The total cost of the machine is Rs 11900 + Rs 1500 = Rs 13400.

  • The estimated life of the machine is 5 years.

  • The residual value after 5 years is estimated to be Rs 1400.

  • The total depreciation that will be charged in 5 years is Rs (13400 - 1400) = Rs 12000.

  • The annual depreciation charge will be Rs 12000/5 = Rs 2400.



Journal Entries


  • On 1st April 2012:


    • Machinery Account Debit Rs 13400

    • Bank Account Credit Rs 13400


  • At the end of each year:


    • Depreciation Account Debit Rs 2400

    • Accumulated Depreciation Account Credit Rs 2400




Impact on Financial Statements


  • Income Statement:


    • The annual depreciation charge of Rs 2400 will be deducted from the revenue of the company.

    • This will reduce the net income of the company.


  • Balance Sheet:


    • The cost of the machinery will be shown as Rs 13400 in the balance sheet.

    • The accumulated depreciation account will be shown as Rs 12000 at the end of 5 years.

    • The net book value of the machinery will be shown as Rs (13400-12000) = Rs 1400 in the balance sheet.
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In a garima factory the machine of a department costs ₹11500 . It is expected that it will work for 20000 hours and its scrap value is estimated at ₹1500. The rent of factory department is ₹400 per month and 25%of the area of department is utilised for conducting the operation of the machine. One foreman and an attendant are employed on a salary of ₹200and ₹100 per month . respectively , to work on one more machine of a similar type . The expenses of the month incurred in the department are as follows :Light charges for the department ₹80; having 16 points in all out of which only 4 points are used at this machine . Total power used for two machines of equal horse-power ₹320 ; Indirect labour for the machine ₹50 and repairs and renewals ₹40. You are required to find out the machine hour rate for one month when it is expected to work for 40 hours a week Related: Machine Hour Rate - Overheads, Cost Accounting?

Verma traders bought a machinery on 1st April 2012 for rs 11900 and spent rs 1500 on it's establishment. The estimated life of machine is five years. After which is residual value is estimated 1400?
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Verma traders bought a machinery on 1st April 2012 for rs 11900 and spent rs 1500 on it's establishment. The estimated life of machine is five years. After which is residual value is estimated 1400? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Verma traders bought a machinery on 1st April 2012 for rs 11900 and spent rs 1500 on it's establishment. The estimated life of machine is five years. After which is residual value is estimated 1400? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Verma traders bought a machinery on 1st April 2012 for rs 11900 and spent rs 1500 on it's establishment. The estimated life of machine is five years. After which is residual value is estimated 1400?.
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