Question : Furniture as on 31st March, 2019—Rs. 4,40,000; Furniture (having book value as
on 1st April, 2019—Rs. 40,000) sold at a loss of 20% on 31st December, 2019. Furniture is to be depreciated @ 10% p.a. Furniture costing Rs. 3,00,000 was also purchased on 1st October, 2019. Calculate the amount of Depreciation and loss on the sale of furniture to be transferred to the Income and Expenditure Account.
Option 1: Loss on sale of furniture Rs 74,000
Depreciation Rs 55,000
Option 2: Loss on sale of furniture Rs 7,400
Depreciation Rs 3,000
Option 3: Loss on sale of furniture Rs 7,400
Depreciation Rs 58,000
Option 4: Depreciation Rs 50,000
Loss on sale of furniture Rs 3,700
Correct Answer:
Loss on sale of furniture Rs 7,400
Depreciation Rs 58,000
Solution : FURNITURE ACCOUNT
| Date | Particulars | Amount | Date | Particulars | Amount |
| 1/1/19 |
To Balance c/d
1 = 40,000 2 = 4,00,000 |
4,40,000 | 31/12/19 |
By Depreciation A/c
1 =40,000x10%x 9/12 |
3,000 |
| 1/10/19 | To Bank A/c (3) | 3,00,000 | 31/12/19 | By I&E A/c (WN1) | 7,400 |
| 31/12/19 | By Bank A/c (WN1) | 29,600 | |||
| 31/3/20 |
By Depreciation A/c
2 =4,00,000x10% 3 =3,00,000x10%x6/12 |
55,000 | |||
| 31/12/20 |
By Balance c/d
2=4,00,000-40,000 3=3,00,000-15,000 |
6,45,000 | |||
| 7,40,000 | 7,40,000 |
Working Note:
1. Book Value as on 1/4/19 = 40,000
(-) Depreciation @10% =
(3,000)
[For 9 months]
Book Value as on 31/12/19 = 37,000
(-) Loss (20% x 37,000) =
(5,400)
Sale =
29,600
2. Total depreciation on all 3 furniture = Rs.3,000 + Rs.55,000 = Rs.58,000.
Hence, the correct option is 3.
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