Question : Furniture as of 1st April, 2019—Rs. 2,20,000; Furniture (having book value as on
1st April, 2019—Rs. 20,000) sold at a gain (profit) of 20% on 31st December, 2019.
Furniture purchased on 1st October, 2019 for Rs. 1,00,000; Charge depreciation @ 10% p.a. on furniture. How much the amount is to be shown in the Income and Expenditure Account?
Option 1: Profit Rs 3,700 credited to Income and Expenditure Account.
Depreciation charged Rs 26,500 debited to Income and Expenditure Account.
Option 2: Profit Rs.3,700 credited to Income and Expenditure Account
Rs.1,500 depreciation debited to Income and Expenditure Account
Option 3: Loss Rs. 3,700 debited to Income and Expenditure Account
Rs. 20,000 depreciation debited to Income and Expenditure Account
Option 4: None of the above
Correct Answer:
Profit Rs 3,700 credited to Income and Expenditure Account.
Depreciation charged Rs 26,500 debited to Income and Expenditure Account.
Solution : FURNITURE ACCOUNT
| Date | Particulars | Amount | Date | Particulars | Amount |
| 1/1/19 |
To Balance c/d
1 = 20,000 2 = 2,00,000 |
2,20,000 | 31/12/19 |
By Depreciation A/c
1 =20,000x10%x 9/12 |
1,500 |
| 1/10/19 | To Bank A/c (3) | 1,00,000 | 31/12/19 | By Bank A/c (WN1) | 22,200 |
| 31/12/19 | To I&E A/c (WN1) | 3,700 | 31/3/20 |
By Depreciation A/c
2 =2,00,000x10% 3 =1,00,000x10%x6/12 |
25,000 |
| 31/12/20 |
By Balance c/d
2=2,00,000-20,000 3=1,00,000-5,000 |
2,75,000 | |||
| 3,23,700 | 3,23,700 |
Working Note:
1. Book Value as on 1/4/19 = 20,000
(-) Depreciation @10% =
(1,500)
[For 9 months]
Book Value as on 31/12/19 = 18,500
(+) Gain (20% x 18,500) =
3,700
Sale =
22,200
2. Total depreciation on all 3 furniture = Rs.1,500 + Rs.25,000 = Rs.26,500.
Hence, the correct option is 1.
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