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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/- ...
**Machinery Account under Fixed Installment Method**
Under the fixed installment method, the cost of the machinery is spread over its useful life by charging a fixed annual installment. This installment includes both the depreciation and interest on the investment in machinery.
To prepare the machinery account, we need to follow the given information and apply the rules of the fixed installment method.
**Step 1: Calculation of Annual Installment**
The annual installment can be calculated using the formula:
Annual Installment = Cost of Machinery / Present Value Factor
For the machinery purchased on 1-1-2013:
Cost of Machinery = 35,000/-
Useful Life = 4 years (2013, 2014, 2015, 2016)
Present Value Factor = (1 - (1 + r)^(-n)) / r
where r = interest rate and n = number of years
Assuming an interest rate of 10% p.a., the present value factor for 4 years is calculated as follows:
Present Value Factor = (1 - (1 + 0.10)^(-4)) / 0.10
= (1 - (1.10)^(-4)) / 0.10
= (1 - 0.68301) / 0.10
= 0.31699 / 0.10
= 3.1699
Therefore, the annual installment for the machinery purchased on 1-1-2013 is:
Annual Installment = 35,000 / 3.1699
= 11,018.80/-
Similarly, for the machinery purchased on 1-4-2014:
Cost of Machinery = 20,000/-
Useful Life = 3 years (2014, 2015, 2016)
Present Value Factor = (1 - (1 + 0.10)^(-3)) / 0.10
= (1 - (1.10)^(-3)) / 0.10
= (1 - 0.75131) / 0.10
= 0.24869 / 0.10
= 2.4869
The annual installment for the machinery purchased on 1-4-2014 is:
Annual Installment = 20,000 / 2.4869
= 8,044.58/-
**Step 2: Depreciation Calculation**
The depreciation for each year can be calculated by multiplying the annual installment by the depreciation rate of 10%:
Depreciation = Annual Installment * Depreciation Rate
= Annual Installment * 10%
For the machinery purchased on 1-1-2013:
Depreciation = 11,018.80 * 10%
= 1,101.88/-
For the machinery purchased on 1-4-2014:
Depreciation = 8,044.58 * 10%
= 804.46/-
**Step 3: Preparation of Machinery Account**
The machinery account should be prepared in the following format:
Machinery Account
Date | Particulars | Amount | Date | Particulars | Amount
-----------------------------------------------------------------
1-1-2013 | To Bank/Cash | 35,000/- | | |
31-12-2013 | By Depreciation | 1,101.88/- | | |
31-12
Under the fixed installment method, the cost of the machinery is spread over its useful life by charging a fixed annual installment. This installment includes both the depreciation and interest on the investment in machinery.
To prepare the machinery account, we need to follow the given information and apply the rules of the fixed installment method.
**Step 1: Calculation of Annual Installment**
The annual installment can be calculated using the formula:
Annual Installment = Cost of Machinery / Present Value Factor
For the machinery purchased on 1-1-2013:
Cost of Machinery = 35,000/-
Useful Life = 4 years (2013, 2014, 2015, 2016)
Present Value Factor = (1 - (1 + r)^(-n)) / r
where r = interest rate and n = number of years
Assuming an interest rate of 10% p.a., the present value factor for 4 years is calculated as follows:
Present Value Factor = (1 - (1 + 0.10)^(-4)) / 0.10
= (1 - (1.10)^(-4)) / 0.10
= (1 - 0.68301) / 0.10
= 0.31699 / 0.10
= 3.1699
Therefore, the annual installment for the machinery purchased on 1-1-2013 is:
Annual Installment = 35,000 / 3.1699
= 11,018.80/-
Similarly, for the machinery purchased on 1-4-2014:
Cost of Machinery = 20,000/-
Useful Life = 3 years (2014, 2015, 2016)
Present Value Factor = (1 - (1 + 0.10)^(-3)) / 0.10
= (1 - (1.10)^(-3)) / 0.10
= (1 - 0.75131) / 0.10
= 0.24869 / 0.10
= 2.4869
The annual installment for the machinery purchased on 1-4-2014 is:
Annual Installment = 20,000 / 2.4869
= 8,044.58/-
**Step 2: Depreciation Calculation**
The depreciation for each year can be calculated by multiplying the annual installment by the depreciation rate of 10%:
Depreciation = Annual Installment * Depreciation Rate
= Annual Installment * 10%
For the machinery purchased on 1-1-2013:
Depreciation = 11,018.80 * 10%
= 1,101.88/-
For the machinery purchased on 1-4-2014:
Depreciation = 8,044.58 * 10%
= 804.46/-
**Step 3: Preparation of Machinery Account**
The machinery account should be prepared in the following format:
Machinery Account
Date | Particulars | Amount | Date | Particulars | Amount
-----------------------------------------------------------------
1-1-2013 | To Bank/Cash | 35,000/- | | |
31-12-2013 | By Depreciation | 1,101.88/- | | |
31-12
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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/- 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.? 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 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.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 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.?.
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.? 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 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.? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 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.?.
Solutions for 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.? in English & in Hindi are available as part of our courses for B Com.
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