Q3 Depreciation Practical Questions and Answers

Get answers to your depreciation questions and learn how to prepare a machinery account using the reducing balance method.

Q3 Depreciation Questions and Answers: All You Need to Know

Questions 1:

On 1st July 1990, a company purchased a machine for rupees 20000. After that, on 1st January 1991, the second machine was purchased for rupees 12000. On 1st April 1992, the first machine purchased on 1st July 1990 was sold for rupees 16500 and a new machine was purchased on the same day for rupees 10000. Prepare Machinery Account for three years after providing depreciation by Reducing the Balance Method to 10 percent per annum.

Solution:

Machinery Account
Depreciation by Reducing the Balance Method at 10% per annum

Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
1990			1990
1st July	To Bank (Purchased)	20,000	31st Dec	By Depreciation (10%)	1,000
1991			1991
1st Jan	To Bank (Purchased)	12,000	31st Dec	By Depreciation (10% on 20,000)	2,000
			31st Dec	By Depreciation (10% on 12,000)	1,200
1992			1992
1st April	By Bank (Sale- 1st machine)	16,500	1st April	By Depreciation (10% on 20,000 for 3M)	500
1st April	To Bank (Purchased)	10,000
31st Dec	By Depreciation (10% on 9,000)	900	31st Dec	By Depreciation (10% on 12,000)	1,080
			31st Dec	By Depreciation (10% on 10,000) for 9M	750

Depreciation Summary:

• 1990: ₹1,000 (10% on ₹20,000 for 6 months)
• 1991: ₹3,200 (10% on ₹20,000 + 10% on ₹12,000)
• 1992: ₹3,230

The final balance in the Machinery Account includes the original values minus the depreciation calculated each year using the Reducing Balance Method.

Question 2:

On 1st January 2018, a company purchased a machine for $15,000. On 1st July 2020, the machine was sold for $7,000. Prepare the Machinery Account for 2018, 2019, and 2020 after providing depreciation by the Straight-Line Method at 15 percent per annum.

Solution:

Machinery Account
Depreciation by Straight-Line Method at 15% per annum

Date	Particulars	Amount ($)
2018
1st Jan	To Bank (Purchased)	15,000
31st Dec	By Depreciation (15%)	2,250
2019
31st Dec	By Depreciation (15%)	2,250
2020
1st July	By Bank (Sale)	7,000
1st July	By Depreciation (6M of 15%)	1,125

Depreciation Summary:

• 2018: $2,250 (15% on $15,000)
• 2019: $2,250 (15% on $15,000)
• 2020: $1,125 (15% on $15,000 for 6 months)

The amount recovered from the sale is entered into the Machinery Account, and depreciation is calculated each year on a straight-line basis.

Question 3:

On 1st February 2017, a business purchased machinery for €20,000. On 1st February 2018, additional machinery was bought for €10,000. On 1st October 2019, the first machine was sold for €12,000. Prepare the Machinery Account for 2017, 2018, and 2019 after providing 10 percent per annum depreciation using the Reducing Balance Method.

Solution:

Machinery Account
Depreciation by Reducing the Balance Method at 10% per annum

Date	Particulars	Amount (€)
2017
1st Feb	To Bank (Purchased)	20,000
31st Dec	By Depreciation (10% on €20,000)	1,833.33
2018
1st Feb	To Bank (Purchased)	10,000
31st Dec	By Depreciation (10% on €18,166.67)	1,816.67
	By Depreciation (10% on €10,000)	1,000
2019
1st Oct	By Bank (Sale – 1st machine)	12,000
1st Oct	By Depreciation (10% on €18,166.67) for 9 months	1,362.50
31st Dec	By Depreciation (10% on €10,000)	1,000

Depreciation Summary:

• 2017: €1,833.33 (10% on €20,000 for 11 months)
• 2018: €2,816.67 (10% on €18,166.67 + 10% on €10,000)
• 2019: €2,362.50 (10% on €18,166.67 for 9 months + 10% on €10,000)

These entries show the annual depreciation and the balance after accounting for the sale of the machine.