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Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum?
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Masheswari steel company purchased a machinery on 1st April 2017 for 2...
Machinery Account for 4 years using Fixed Installment Method @ 5% per annum
Fixed installment method is a method of depreciation where an equal amount is charged as depreciation every year. In this method, the cost of the asset is divided by the number of years of its useful life, and the same amount is charged as depreciation every year. The formula for calculating depreciation under fixed installment method is:
Depreciation = Cost of Asset / Number of Years of Useful Life
Here, we are given that the machinery was purchased on different dates and at different costs. We need to prepare a machinery account for 4 years using fixed installment method at the rate of 5% per annum. Let's prepare the machinery account:
Machinery Account
Particulars | 1/4/2017 | 1/4/2018 | 1/10/2019 | 30/6/2020 | Total
Cost | 20,000 | 8,000 | 6,000 | 10,000 | 44,000
Add: Establishment Charges | - | 400 | - | - | 400
Total Cost | 20,000 | 8,400 | 6,000 | 10,000 | 44,400
Depreciation @ 5% | 1,000 | 420 | 300 | 500 | 2,220
Balance | 19,000 | 7,980 | 5,700 | 9,500 | -
Explanation:
- The machinery account has four columns representing the four years for which we need to calculate depreciation.
- In the first row, we write the cost of each machinery purchased on different dates. The total cost of all four machines is 44,000.
- In the second row, we add the establishment charges of 400 that were incurred in the second year.
- In the third row, we calculate the total cost of the machinery by adding the cost and establishment charges.
- In the fourth row, we calculate the depreciation for each year at the rate of 5% per annum. The formula used is: Depreciation = Total Cost x 5%.
- In the last row, we write the balance after deducting the depreciation from the total cost. The balance is carried forward to the next year.
Conclusion:
In this way, we can prepare a machinery account using fixed installment method at a given rate of depreciation. This method is simple and easy to understand. It helps in spreading the cost of the asset over its useful life and provides a fair representation of the asset's value in the financial statements.
Fixed installment method is a method of depreciation where an equal amount is charged as depreciation every year. In this method, the cost of the asset is divided by the number of years of its useful life, and the same amount is charged as depreciation every year. The formula for calculating depreciation under fixed installment method is:
Depreciation = Cost of Asset / Number of Years of Useful Life
Here, we are given that the machinery was purchased on different dates and at different costs. We need to prepare a machinery account for 4 years using fixed installment method at the rate of 5% per annum. Let's prepare the machinery account:
Machinery Account
Particulars | 1/4/2017 | 1/4/2018 | 1/10/2019 | 30/6/2020 | Total
Cost | 20,000 | 8,000 | 6,000 | 10,000 | 44,000
Add: Establishment Charges | - | 400 | - | - | 400
Total Cost | 20,000 | 8,400 | 6,000 | 10,000 | 44,400
Depreciation @ 5% | 1,000 | 420 | 300 | 500 | 2,220
Balance | 19,000 | 7,980 | 5,700 | 9,500 | -
Explanation:
- The machinery account has four columns representing the four years for which we need to calculate depreciation.
- In the first row, we write the cost of each machinery purchased on different dates. The total cost of all four machines is 44,000.
- In the second row, we add the establishment charges of 400 that were incurred in the second year.
- In the third row, we calculate the total cost of the machinery by adding the cost and establishment charges.
- In the fourth row, we calculate the depreciation for each year at the rate of 5% per annum. The formula used is: Depreciation = Total Cost x 5%.
- In the last row, we write the balance after deducting the depreciation from the total cost. The balance is carried forward to the next year.
Conclusion:
In this way, we can prepare a machinery account using fixed installment method at a given rate of depreciation. This method is simple and easy to understand. It helps in spreading the cost of the asset over its useful life and provides a fair representation of the asset's value in the financial statements.
Community Answer
Masheswari steel company purchased a machinery on 1st April 2017 for 2...
M1 1000
m2 1420
m3 1570
m4 2095
balance of the machine 38315
m2 1420
m3 1570
m4 2095
balance of the machine 38315
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Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum?
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Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum?.
Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Masheswari steel company purchased a machinery on 1st April 2017 for 20,000 on 1st April ,2018 a second machinery was purchased for 8,000 and 400 were met as establishment charges . The third and fourth machines were purchased on 1 October 2019 for 6,000 and on 30th June 2020 for 10,000 respectively. Prepare a machinery account for 4 years by using fixed installment method @ 5 % per annum?.
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