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In Anil's Ledger, book value of a machin...

In Anil's Ledger, book value of a machine as on 1st April, 2018 is Rs 2,80,000. Depreciation is charged `"@ "15%` p.a. by Written Down Value Method. The machine is under in an annual repairs and maintenance contract with Mahesh, who charges Rs 5,000 per quarter. A new machine was bought and the cheque issued for Rs 3,90,000 and the cash paid Rs 10,000 to Brahm for its immediate installation and subsequent use on 1st July, 2018. The annual maintenance contract of the new machine bought was to be signed after the one year gurantee period was over. Show the Machinery Account, as it would appear in the Ledger for the year ended 31st March, 2019.

Text Solution

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1. `{:("Calculation of Depreciation: ",₹),("On old machine" "@ "15% " p.a. on Rs 2,80,000" " for 1 year","42,000"),("On new machine" "@ "15% "p.a. on Rs 4,00,000 for 9 months " (Rs 4,00,000xx15//100xx9//12) ,"45,000"),("Total ","87,000"):}`
2. Repairs and maintenance charges are Revenue Expenses so they are transferred (charged) to the Profit and Loss Account.
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