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Shankar purchased a machine on 1-1-2013 for 35,000/- and spent 5000/- on its erection on 1-4-2014 he purchased another machine worth 20000/-. On 31-12-2016, machinery purchased on 1-1-2013 become un suitable and sold for 5000/- prepare machinery account under fixed installment method, charging depreciation @ 10% p.a. on all. The machine up to 31-12-2016.?
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Shankar purchased a machine on 1-1-2013 for 35,000/- and spent 5000/- ...
Solution:

Machinery Account under Fixed Installment Method:

1. Calculation of Depreciation:

- Depreciation = Cost of Machinery * Rate of Depreciation
- Rate of Depreciation = 10% per annum

- For the machinery purchased on 1-1-2013:
- Depreciation for the year 2013 = 35,000 * 10% = 3,500/-
- Depreciation for the year 2014 = (35,000 + 5,000) * 10% = 4,000/-
- Depreciation for the year 2015 = (35,000 + 5,000) * 10% = 4,000/-
- Depreciation for the year 2016 (till 31-12-2016) = (35,000 + 5,000) * 10% = 4,000/-

- For the machinery purchased on 1-4-2014:
- Depreciation for the year 2014 = 20,000 * 10% = 2,000/-
- Depreciation for the year 2015 = 20,000 * 10% = 2,000/-
- Depreciation for the year 2016 (till 31-12-2016) = 20,000 * 10% = 2,000/-

2. Calculation of Annual Installment:

- Annual Installment = (Cost of Machinery - Scrap Value) / Number of Years

- For the machinery purchased on 1-1-2013:
- Annual Installment = (35,000 - 5,000) / 5 = 6,000/-

- For the machinery purchased on 1-4-2014:
- Annual Installment = (20,000 - 0) / 5 = 4,000/-

3. Calculation of Interest:

- Interest = Outstanding Balance * Rate of Interest

- Rate of Interest = 10% per annum
- Outstanding Balance = Cost of Machinery - Total Depreciation

- For the machinery purchased on 1-1-2013:
- Outstanding Balance as on 1-1-2013 = 35,000/-
- Outstanding Balance as on 31-12-2013 = 35,000 - 3,500 = 31,500/-
- Outstanding Balance as on 31-12-2014 = 31,500 - 4,000 = 27,500/-
- Outstanding Balance as on 31-12-2015 = 27,500 - 4,000 = 23,500/-
- Outstanding Balance as on 31-12-2016 = 23,500 - 4,000 = 19,500/-

- For the machinery purchased on 1-4-2014:
- Outstanding Balance as on 1-4-2014 = 20,000/-
- Outstanding Balance as on 31-12-2014 = 20,000 - 2,000 = 18,000/-
- Outstanding Balance as on 31-12-2015 = 18,000 - 2,000 = 16,000/-
- Outstanding Balance
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Shankar purchased a machine on 1-1-2013 for 35,000/- and spent 5000/- ...
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Shankar purchased a machine on 1-1-2013 for 35,000/- and spent 5000/- on its erection on 1-4-2014 he purchased another machine worth 20000/-. On 31-12-2016, machinery purchased on 1-1-2013 become un suitable and sold for 5000/- prepare machinery account under fixed installment method, charging depreciation @ 10% p.a. on all. The machine up to 31-12-2016.?
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