M Martin bought two machines on credit from Classic machines on 1 January 20x3 for $20 000 each. He charged the depreciation on the machines at 20% per annum for each year by the straight ling method. His depreciation according to the months of ownership Mis policy is to charge One of the machines was sold for $10 500 cash on 30 September 20X5. On the same date, a replacement machine costing $24 000 was bought for cash. Martin's accounting year ends on 31 December each year, REQUIRED (a) Prepare Machinery Account for each of the three years 20X3, 20x4 and 20X5 (b) Prepare the Machinery Disposal Account for 20x5 (d) Prepare the provision for Depreciation Account for the three years 20X3, 20x4 and 20xs ad Previous question

Question

M Martin bought two machines on credit from Classic machines on 1 January 20x3 for $20 000 each. He charged the depreciation on the machines at 20% per annum for each year by the straight ling method. His depreciation according to the months of ownership Mis policy is to charge One of the machines was sold for $10 500 cash on 30 September 20X5. On the same date, a replacement machine costing $24 000 was bought for cash. Martin's accounting year ends on 31 December each year, REQUIRED (a) Prepare Machinery Account for each of the three years 20X3, 20x4 and 20X5 (b) Prepare the Machinery Disposal Account for 20x5 (d) Prepare the provision for Depreciation Account for the three years 20X3, 20x4 and 20xs ad Previous question

Answer 1

To answer this question, we need to understand the concepts of machinery accounts, depreciation, disposal accounts, and provision for depreciation.

(a) Prepare Machinery Account for each of the three years 20X3, 20x4, and 20X5:

To prepare the Machinery Account, we need to keep track of the following information:

1. Opening balance: The initial cost of the machinery (in this case, $20,000 each).

2. Depreciation: Calculate and record the depreciation expense for each year using the straight-line method at a rate of 20% per annum. For each machine, calculate the depreciation as follows:
Depreciation expense = Opening balance * Depreciation rate

3. Closing balance: Deduct the depreciation expense from the opening balance to get the closing balance for each year.

Here's how the Machinery Account would look like for each year:

Machinery Account for 20X3:
-----------------------------------------------------
| Particulars | Amount |
-----------------------------------------------------
| Opening Balance | $20,000 |
| Depreciation Expense | - |
| Closing Balance | - |
-----------------------------------------------------

Machinery Account for 20X4:
-----------------------------------------------------
| Particulars | Amount |
-----------------------------------------------------
| Opening Balance | - |
| Depreciation Expense | - |
| Closing Balance | - |
-----------------------------------------------------

Machinery Account for 20X5:
-----------------------------------------------------
| Particulars | Amount |
-----------------------------------------------------
| Opening Balance | - |
| Depreciation Expense | - |
| Closing Balance | - |
-----------------------------------------------------

(b) Prepare the Machinery Disposal Account for 20X5:

To prepare the Machinery Disposal Account, we need to record the sale of the machine, the cost of the replacement machine, and any gain or loss on disposal.

Here's how the Machinery Disposal Account would look like for 20X5:

Machinery Disposal Account for 20X5:
-----------------------------------------------------------------
| Particulars | Amount |
-----------------------------------------------------------------
| Proceeds from sale of machine | $10,500 |
| Cost of replacement machine | -$24,000 |
| Loss on Disposal (if any) | - |
| Gain on Disposal (if any) | - |
-----------------------------------------------------------------

(d) Prepare the provision for Depreciation Account for the three years 20X3, 20x4, and 20X5:

To prepare the provision for Depreciation Account, we need to record the annual depreciation expense for each year.

Here's how the provision for Depreciation Account would look like for each year:

Provision for Depreciation Account for 20X3:
----------------------------------------------------
| Particulars | Amount |
----------------------------------------------------
| Depreciation Expense | - |
----------------------------------------------------

Provision for Depreciation Account for 20X4:
----------------------------------------------------
| Particulars | Amount |
----------------------------------------------------
| Depreciation Expense | - |
----------------------------------------------------

Provision for Depreciation Account for 20X5:
----------------------------------------------------
| Particulars | Amount |
----------------------------------------------------
| Depreciation Expense | - |
----------------------------------------------------