KIA Motors Limited Purchase of machinery
KIA Motors Limited Purchased a machinery for Rs 15,00,000 on 1 April, 2015.
- On 1″October, 2016 another Machinery was purchased for Rs 6,00,000.
- On 1 October, 2017 a new Machine was purchased for Rs 4,50,000. Depreciation at 20% per annum on the diminishing value.
- On 1 January, 2019 machine No.2 (purchased on 1 October, 2016) was damaged and had sold for Rs. 2,50,000 and on the same date a new machinery was purchased for Rs. 4,00,000.
You are requested to show the machinery account from the accounting year 2015 to 2019. Books are closed on 31″ March every year. Company follow the charging to the assets account method for recording of its depreciation in books.
Firstly, we need to calculate the depreciation for each year and update the cost and accumulated depreciation of each machine accordingly.
Here’s the machinery account for KIA Motors Limited from the accounting year 2015 to 2019:
Machinery Account
Date | Particulars | Amount(Rs.) | Amount(Rs.) |
---|---|---|---|
01/04/2015 | To Machinery A/c | 15,00,000 | 15,00,000 |
31/03/2016 | By Depreciation | 3,00,000 | 3,00,000 |
01/04/2016 | To Machinery A/c | – | 12,00,000 |
30/09/2016 | By Machinery A/c | 15,00,000 | 27,00,000 |
01/10/2016 | To Machinery B/c | 6,00,000 | 6,00,000 |
31/03/2017 | By Depreciation | 2,40,000 | 5,40,000 |
01/04/2017 | To Machinery B/c | – | 3,60,000 |
01/10/2017 | To Machinery C/c | 4,50,000 | 4,50,000 |
31/03/2018 | By Depreciation | 1,08,000 | 1,08,000 |
01/04/2018 | To Machinery C/c | – | 3,42,000 |
01/01/2019 | By Machinery B/c (sold) | 2,50,000 | 90,000 |
01/01/2019 | To Machinery A/c (new) | 4,00,000 | 4,00,000 |
31/03/2019 | By Depreciation | 90,000 | 1,98,000 |
31/03/2019 | By Depreciation | 72,000 | 1,26,000 |
---|
Balance c/d | 4,00,000 | 4,26,000 | |
---|---|---|---|
Total | 30,50,000 | 30,50,000 |
Note: A/c stands for account and c/d stands for carried down.
Explanation:
- On 1 April 2015, KIA Motors Limited purchased Machinery A for Rs. 15,00,000 and debited the machinery account with the same amount.
- For the year ended 31 March 2016, the depreciation at 20% on the diminishing value of Rs. 15,00,000 was Rs. 3,00,000. This amount was credited to the machinery account to show the reduction in the value of the asset.
- On 1 April 2016, the cost of Machinery A was updated to Rs. 12,00,000 (i.e., Rs. 15,00,000 – Rs. 3,00,000).