Worksheet

Revision

1. Ajith quit his job and started working for a ‘Wood Craft’ Company. The transactions of the
business during July are as follows

2020 Began business by investing cash Rs.10000 in the company’s share

July 1 capital
July 4 Paid two months rent in advance for a shop of Rs.2000
5 Bought equipment for cash Rs.1200
7 Bought supplies on credit Rs.700
10 Received payment for remodelling a kitchen
14 Paid for an advertisement that appeared in the local newspaper
Rs.1400
17 Received payment for furnishing office room Rs.11200
23 Billed customers for work done other than on cash terms Rs.13100
25 Paid wages to assistant Rs.1500
28 Paid electricity charges Rs.240
29 Received part payment from customers billed on September 23,
Rs.4800
30 Paid a dividend of Rs.2500

Required

1. Prepare journal entries for the above transactions

2. Post the journal entries to the ledger
3. Prepare a trial balance

Fixed assets

2. Mehra polymer company bought a new machine. The company incurred the following
expenditure in connection with the purchase

Purchase price (net of discount of Rs,60000) Rs.540000

VAT Rs.40000

Freight Rs.12000

Transit insurance Rs.3000

The special bedding for the machine Rs.6000

Cost of trial production runs Rs.4000

Compensation to a worker for injury while unloading the machine. Rs.2000

Compute the cost of acquisition of the machine

Depreciation

Comparison of Depreciation methods

3. Kiran computers bought a machine for making printed circuit boards (PCBs) for Rs.8,00,000.
The machine was expected to be useful for five years and an estimated residual value of
Rs.40000. the machine is expected to produce 50000 PCBs. it produced 15000 PCBs in year
1, 12000 PCBs in year 2, 3000 PCBs in year 3, 16000 PCBs in year 4, and 4000 PCBs in year 5
Compute the depreciation expense for each year and prepare a depreciation schedule under
the straight-line method and diminishing balance method.
Comment on the trend of yearly depreciation expense and carrying amount.

Computation of Depreciation for partial periods

4. Shyam rubber company bought a machine on July 1, 2019. it has an estimated useful life of
five years and an estimated residual value of Rs.2000. the company’s accounting period
ends on March 31. Compute the depreciation expense for the year ending March 2019, use
the straight-line method.

Change in depreciation method

5. Hamid Builders bought construction machinery on January 1, 2016, for RS.8,00,000, with an
estimated useful life of nine years and an estimated residual value of Rs.80000. the
management decides to change the depreciation method from written down value to the
straight line in the financial statements for the year ended December 31, 2020. Show the
depreciation schedule