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EKTA COMPANY

PART-A

On 1
st
April 2007 a new plant was purchased for Rs. 40,000 and a further sum of Rs.
2,000 was spent on its installation.
On 1
st
October 2009 another plant was acquired for Rs. 25,000.
Due to an accident on 3
rd
January 2010 the first plant was totally destroyed and the
remnants were sold for Rs. 1,000 only.
On 21
st
January 2011 a second hand plant was purchased for Rs. 30,000 and a
further sum of Rs. 5,000 was spent for bringing the same to use on and from 15
th

March, 2011.
Depreciation has been provided at 10 per cent on straight-line basis. It was a practice
to provide depreciation for full year on all acquisition made at any time during any
year and to ignore depreciation on any item sold or disposed of during the year.
None of the assets were insured. The accounts are closed annually to 31
st
March.
It is now decided to follow the rate of 15 per cent on diminishing balance method with
retrospective effect in respect of the existing items of plant and to make the
necessary adjustment entry on 1
st
April, 2011.
Prepare Plant Account for 2007-08 to 2011-12










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PART-B

Ekta company’s calendar year is the accounting year.

The company purchased machinery on 1
st
April 2010 costing Rs. 2,00,000/-.
It purchased further machinery on 1
st
October 2010, costing Rs. 1,00,000/- and on 1
st

July 2011 costing Rs. 50,000/-. On 1
st
January 2012 one third of the machinery,
which was installed on 1
st
April 2010, became obsolete and was sold for Rs. 20,000/-
.
Show how the changes in the following cases will affect the financial statements of
the company in 2012. Also, prepare Machinery account from 2010-2012.

1. If depreciation is provided @ 10% p.a. by Cost Price Method (Fixed Installment
Method) but in 2012 Management decides to shift to 15% p.a. by Diminishing
Balance Method (Written Down Value Method) with retrospective effect from
2010.

2. If depreciation is provided @ 10% p.a. by Diminishing Balance Method (Written
Down Method) but in 2012 Management decides to shift to 15% p.a. by Cost
Price Method (Fixed Instalment Method) with retrospective effect from 2010.

3. If depreciation is provided @ 10% p.a. by Cost Price Method (Fixed Instalment
Method) but in 2012 Management decides to shift to 15% p.a. by Diminishing
Balance Method (Written Down Value Method) with immediate effect.

4. If depreciation is provided @ 10% p.a. by Diminishing Balance Method (Written
Down Value Method) but in 2012 Management decides to shift to 20% p.a. by
Cost Price Method (Fixed Instalment Method) with immediate effect.