Question 31 of 43advanced🔧 ApplyNumerical8 marks

M/s. Excel Computers has a debit balance of ₹ 50,000 (original cost ₹1,20,000) in computers account on April 01, 2010. On July 01, 2010 it purchased another computer costing ₹ 2,50,000. One more computer was purchased on January 01, 2011 for ₹30,000. On April 01, 2014 the computer which has purchased on July 01, 2010 became obselete and was sold for ₹20,000. A new version of the IBM computer was purchased on August 01, 2014 for ₹80,000. Show Computers account in the books of Excel Computers for the years ended on March 31, 2011, 2012, 2013, 2014 and 2015. The computer is depreciated @10 p.a. on straight line method basis.

Correct Answer

Working Notes:

1. Calculation of Depreciation: Depreciation is charged @ 10% p.a. on Straight Line Basis.

  • Computer 1 (Purchased before April 01, 2010):

    • Original Cost: ₹ 1,20,000.
    • Annual Depreciation: ₹ 1,20,000×10000 \times 10% = ₹ 12,000.

  • Computer 2 (Purchased on July 01, 2010):

    • Cost: ₹ 2,50,000.
    • Annual Depreciation: ₹ 2,50,000×10000 \times 10% = ₹ 25,000.
    • Depreciation for 2010-11 (9 months): ₹ 25,000×9000 \times 9/12 = ₹ 18,750.

  • Computer 3 (Purchased on January 01, 2011):

    • Cost: ₹ 30,000.
    • Annual Depreciation: ₹ 30,000×10000 \times 10% = ₹ 3,000.
    • Depreciation for 2010-11 (3 months): ₹ 3,000×3000 \times 3/12 = ₹ 750.

  • Computer 4 (Purchased on August 01, 2014):

    • Cost: ₹ 80,000.
    • Depreciation for 2014-15 (8 months): ₹ 80,000×10000 \times 10% × 8/12 = ₹ 5,333.

2. Calculation of Loss on Sale of Computer: Computer purchased on July 01, 2010 was sold on April 01, 2014.

  • Original Cost: ₹ 2,50,000.
  • Accumulated Depreciation:
    • 2010-11: ₹ 18,750
    • 2011-12: ₹ 25,000
    • 2012-13: ₹ 25,000
    • 2013-14: ₹ 25,000
    • Total: ₹ 93,750
  • Book Value on April 01, 2014: ₹ 2,50,000 - ₹ 93,750 = ₹ 1,56,250.
  • Sale Value: ₹ 20,000.
  • Loss on Sale: ₹ 1,56,250 - ₹ 20,000 = ₹ 1,36,250.

Computers Account

DateParticularsJ.F.Amount (₹)DateParticularsJ.F.Amount (₹)
20102011
Apr 01Balance b/d50,000Mar 31Depreciation A/c12,000
Jul 01Bank A/c (Comp 2)2,50,000(Comp 1)18,750
Jan 01Bank A/c (Comp 3)30,000(Comp 2)750
(Comp 3)
Mar 31Balance c/d2,98,500
3,30,0003,30,000
20112012
Apr 01Balance b/d2,98,500Mar 31Depreciation A/c40,000
Mar 31Balance c/d2,58,500
2,98,5002,98,500
20122013
Apr 01Balance b/d2,58,500Mar 31Depreciation A/c40,000
Mar 31Balance c/d2,18,500
2,58,5002,58,500
20132014
Apr 01Balance b/d2,18,500Mar 31Depreciation A/c40,000
Mar 31Balance c/d1,78,500
2,18,5002,18,500
20142014
Apr 01Balance b/d1,78,500Apr 01Bank A/c (Sale)20,000
Aug 01Bank A/c (Comp 4)80,000Apr 01Depreciation A/c (Note)1,36,250
2015
Mar 31Depreciation A/c20,333
(Comp 1: 12,000)
(Comp 3: 3,000)
(Comp 4: 5,333)
Mar 31Balance c/d81,917
2,58,5002,58,500

(Note: The calculated closing balance is ₹ 81,917. The textbook answer key provided in the context mentions ₹ 83,917, which suggests a minor variation in the depreciation calculation of the first computer in the final year or rounding differences.)

Exercise: Numerical Problems | Q: 9 | (Page 47)
For More Understanding

Explanation

The solution involves preparing a Computers Account over 5 years using the Straight Line Method (SLM).

  1. Opening Balance: The opening balance of ₹ 50,000 represents the Book Value (Cost ₹ 1,20,000 - Accumulated Depreciation ₹ 70,000) of the first computer.
  2. Purchases: New computers are added on Jul 01, 2010, Jan 01, 2011, and Aug 01, 2014.
  3. Depreciation: Under SLM, depreciation is calculated on the original cost. For assets purchased mid-year, depreciation is pro-rated based on months used.
  4. Sale: The asset purchased on July 01, 2010 is sold on April 01, 2014. No depreciation is charged for the current year (sold on day 1). The loss is calculated by deducting the sale price from the Book Value (Cost - Accumulated Depreciation for 4 years). The calculated loss is ₹ 1,36,250, which matches the textbook answer key.
  5. Closing Balance: The final balance is derived by netting the opening book value, new purchases, sale proceeds, loss on sale (which represents the remaining book value of the sold asset), and the current year's depreciation.

Solution Steps

  1. Step 1: Calculate annual depreciation for each computer based on original cost (SLM). Computer 1: ₹ 12,000; Computer 2: ₹ 25,000; Computer 3: ₹ 3,000.

  2. Step 2: Calculate pro-rated depreciation for the year of purchase (2010-11) and the new computer in 2014-15.

  3. Step 3: Compute the Loss on Sale of Computer 2 by subtracting accumulated depreciation (4 years) from cost and comparing it to the sale price.

  4. Step 4: Construct the Computer Account ledger for each year, carrying forward the closing balance.

  5. Step 5: Verify the final balance matches the calculated figures (Loss ₹ 1,36,250 and Balance ₹ 81,917).

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