Problem.No.

1
Calculate the rate of depreciation under straight line method(SLM) from the following:
Purchased a second hand machine for Rs.96,000, spent Rs.24,000 on its cartage, repairs and installation,
estimated useful life of machine 4 years. Estimated residual value Rs.72,000.

Cost of machine−scrap value of machine

Amount of depreciation =
life∈ years

( 96,000+24,000 )−72,000
= = Rs.12,000
4

Amount of depreciation
Rate of depreciation = X 100
Cost of machine

12,000
= X 100 = 10%
1,20,000

Problem.No.2
M/s. Singhania & Bros. purchased a plant for Rs.5,00,000 on April 01, 2016 & spent Rs.50,000 for its
installation. The Salvage value of the plant after its useful life of 10 years is estimated to be Rs.10,000. Record
Journal entries for the year 2016-17 & draw-up Plant A/c and depreciation A/c for the first three years given
that the depreciation is charged using straight line method if :
i. The books of accounts close on March 31 every year ; &
ii. The firm charges depreciation to the asset account.

Working Notes:
1. Calculation of Original Cost
Rs.
Purchase cost 5,00,000
(+) Installation Cost 50,000
5,50,000

2. Salvage value = Rs.10,000

3. Useful life = 10 years
4. Depreciation Amount = 5,50,000 – 10,0000 = Rs.54,000
10

Books of Singhania & Bros.

Journal
Date Particulars L.F Debit Credit
(Rs.) (Rs.)
Apr 1 Plant A/c Dr. 5,00,000
2016 To Bank A/c 5,00,000
(Purchased Plant for Rs.50,000)
Apr 1 Plant A/c Dr. 50,000
To Bank A/c 50,000
(expenses incurred on installation)
2017 Depreciation A/c Dr. 54,000
Mar 31 To Plant A/c 54,000
2017 P&L A/c Dr. 54,000
Mar 31 To Depreciation A/c 54,000
(Depreciation debited to P & L A/c)

Plant A/c
Date Particulars Amount Date Particulars Amount
2016 To Bank A/c 5,00,000 2017 By Depreciation A/c 54,000
Apr1 Mar 31
To Bank(Instaln. Exp..) 50,000 By Balance c/d 4,96,000
5,50,000 5,50,000
2017 To Balance b/d 4,96,000 2018 By Depreciation A/c 54,000
Apr Mar 31 By Balance c/d 4,42,000
1
4,96,000 4,96,000
2018 To Balance b/d 4,42,000 2019 By Depreciation A/c 54,000
Apr Mar 31 By Balance c/d 3,88,000
1
4,96,000 4,96,000
2019 To Balance b/d 3,88,000
Apr
1

Depreciation A/c
Date Particulars Amount Date Particulars Amount
54,000 54,000
2017 To Plant A/c 54,000 2017 By P & L A/c 54,000
Mar Mar 31
31
54,000 54,000
2018 To Plant A/c 54,000 2018 By P & L A/c 54,000
Mar Mar 31
31
54,000 54,000
2019 To Plant A/c 54,000 2019 By P & L A/c 54,000
Mar Mar 31
31
Problem.No.3

Problem.No.4

Problem.No.5

Furniture A/c
Problem.No.6
Problem.No. 7