FA Assignment 2

FINANCIAL ACCOUNTING
ASSIGNMENT 2
Q. 1. On 1st July 2018, Ram & Co. purchased machinery worth Rs. 40,000. On 1st July 2020 it buys
additional machinery worth Rs. 10,000. On 30th June, 2021 half of the machinery purchased on
1st July, 2018 is sold for Rs. 8,200. The company writes off 10% p.a. on the original cost. The
accounts are closed every year on 31st December. Show the machinery account for four years.
Q. 2. A company acquired he following assets:

a) On January 1st, 2020, a plant costing Rs. 1,50,000 having estimated life of 15 years.
b) On April 1st, 2020, a plant costing Rs. 75,000 having estimated life of 10 years.
c) On July 1st, 2021, a plant costing Rs. 60,000 having estimated life of 8 years.
d) On May 1st, 2022, a plant costing Rs. 1,00,000 having estimated life of 6 years.
On July 1st, 2022, a part of plant costing Rs. 30,000 on January 1st, 2020 was sold for Rs.
16,800. Residual value of each of the plant acquired is 10% of its Original Cost. The
company charges depreciation on SLM basis and closes its books every year on 31st
December. Prepare Plant Account for the year 2020, 2021 and 2022.
Q. 3. On January 1st, 2020, XYZ Ltd. purchased a machinery for Rs. 60,000 and on 30th June 2021,
it acquired additional machinery at a cost of Rs. 10,000. On 31st March 2022, one of the
original machines which had cost of Rs. 2,500 was found to have become obsolete and was
sold as a scrap for Rs. 500. It was replaced on that date by a new machine costing Rs. 4,000.
Depreciation is to be provided @ 15% p.a. on the basis of diminishing balance method.
Accounts are closed every year on 31st December. Prepare the Machinery Account for first
three years.
Q. 4. A company, whose accounting year is the calendar year, purchased on 1st April, 2018,
machinery costing Rs. 30,000. It purchased further machinery on 1st October, 2018, costing Rs.
20,000 and on 1st July, 2019, costing Rs. 10,000. On 1st January, 2020, one-third of the
machinery installed on 1st April, 2018, became obsolete and was sold for Rs. 3,000.
Show how the machinery account would appear in the books of the company, it being given
that machinery was depreciated by Diminishing Balance Method at 10% p.a. What would be
the balance of Machinery account on 1st January, 2021?
Q. 5. An asset was purchased on lease on April 1st, 2018 for five years at a cost of Rs. 50,00,000. It
is proposed to depreciate the lease by annuity method by charging normal rate of interest @
5%. According to annuity table, annuity value of Re. 1 at 5% for 5 years is 0.230975. Show
Leasehold asset account for five years.
Q. 6. A machine was acquired on 1st April 2020 at a cost of Rs. 45,000, the cost of installation was
Rs. 5,000. It is expected that its total life will be 1,00,000 hours. During 2020-21, it worked for
8,000 hours and during 2021-22 for 12000 hours. Write up the machinery account for 2020-21
and 2021-22 charging depreciation on the basis of Machine Hour Rate Method.
Q. 7. On April 1st 2017, a Company acquired a mine at a cost of Rs 3,00,000. The estimated
reserve of minerals in tons is 30,00,000 of which 80% is expected to be raised. The first three
years raisings are:
2017-18: 1,60,000 tons
2018-19: 2,24,000 tons,
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CS Sangeeta Bagga
2019-20: 2,00,000 tons.
Show the Mines Account charging depreciation under the Depletion method for three years.
Q. 8. A Computer Company has purchased some computers worth Rs. 50,00,000. It cost them
Rs. 200,000 to transport the computers to their location. The Company considers that the
useful life of Computers is five years and they can expire the computers at a value of 100,000
at the end of their useful life. Create a depreciation schedule for the asset using the Sum of
years’ digit method.
Q. 9. M Ltd. which depreciates its machinery @ 10% per annum according to diminishing
balance method, had on 1st April, 2012 Rs.4,86,000 balance in its machinery account.
During the year ended 31st March, 2013, out of the whole machinery purchased on 1st April,
2010 for Rs. 6,00,000, a part of machine costing Rs.60,000 was sold for Rs. 40,000 on 1st
October, 2012 and a new machinery costing Rs.70,000 was purchased and installed on the
same date; installation charges being Rs.5,000. The company wants to change its method of
depreciation from diminishing balance method to straight line method w.e.f. 1st April, 2010
and adjust the difference before 31st March, 2013, the rate of depreciation remaining the
same as before. Show the machinery account for the year ended 31st March, 2013.
Q. 10. Answer the following questions:

a) Explain the meaning and causes of Depreciation.
b) Differentiate between Straight Line Method and Written Down Value Method.
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CS Sangeeta Bagga

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FINANCIAL ACCOUNTING

Q. 2. A company acquired he following assets:

Q. 10. Answer the following questions:

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