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Abc limited purchase machinary costing 60000 on 1 april 2006 Company has decided to purchase another machinary 8000 include installation 2000.On 1 august 2007.The company has decided to sold 5000 for 3000 as on 1 December 2008 . Depreciation is allowed at the rate of 10 %.On Written down method. The machinary sold is the second machinary prepare machinary A/C and Dep A/C as on 31 Mar 2010?
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Abc limited purchase machinary costing 60000 on 1 april 2006 Company h...
Machinery Account

On 1st April 2006, ABC Limited purchased machinery costing $60,000. On 1st August 2007, the company decided to purchase another machinery costing $8,000, including installation costs of $2,000. On 1st December 2008, the company sold 5,000 worth of machinery for $3,000. Depreciation is allowed at the rate of 10% on the Written Down Method. We need to prepare the Machinery Account and Depreciation Account as on 31st March 2010.

Machinery Account

| Date | Particulars | Amount ($) | Date | Particulars | Amount ($) |
|------------|----------------------|-------------|------------|----------------------|-------------|
| 1/4/2006 | To Bank A/c | 60,000 | 1/12/2008 | By Sales A/c | 3,000 |
| | | | 31/3/2010 | By Depreciation A/c | ? |
| 1/8/2007 | To Bank A/c | 8,000 | | | |
| | | | | | |
| 31/3/2010 | By Balance c/d | ? | | | |
| | | | | | |
| Total | | 68,000 | Total | | 3,000 |

Depreciation Account

| Date | Particulars | Amount ($) |
|------------|----------------------|-------------|
| 31/3/2007 | To Profit and Loss A/c| 6,000 |
| 31/3/2008 | To Profit and Loss A/c| 6,000 |
| 31/3/2009 | To Profit and Loss A/c| 6,000 |
| | | |
| Total | | 18,000 |

Calculation of Depreciation

Depreciation is calculated at a rate of 10% on the Written Down Method. The depreciation for each year is as follows:

Year 1 (2006-2007): $60,000 * 10% = $6,000
Year 2 (2007-2008): ($60,000 - $6,000) * 10% = $5,400
Year 3 (2008-2009): ($60,000 - $6,000 - $5,400) * 10% = $4,860

Explanation

1. On 1st April 2006, ABC Limited purchased machinery costing $60,000. The entry is made by debiting the Machinery Account and crediting the Bank Account.
2. On 1st August 2007, ABC Limited purchased another machinery for $8,000, including installation costs of $2,000. The entry is made by debiting the Machinery Account and crediting the Bank Account.
3. On 1st December 2008, ABC Limited sold $5,000 worth of machinery for $3,000
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Abc limited purchase machinary costing 60000 on 1 april 2006 Company has decided to purchase another machinary 8000 include installation 2000.On 1 august 2007.The company has decided to sold 5000 for 3000 as on 1 December 2008 . Depreciation is allowed at the rate of 10 %.On Written down method. The machinary sold is the second machinary prepare machinary A/C and Dep A/C as on 31 Mar 2010?
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