Depreciation Test 13

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Depreciation Test 13

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Weekly Quiz Competition

Question 1
1 / -0

Under the diminishing balance method, the depreciation amount __________.

A
constant each year

B
declines each year

C
increases each year

D
None of these

Solution

Under diminishing balance method, depreciation decreases every year. Since the book value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of the asset never reduces to zero.
Question 2
1 / -0

Double-declining method is often used in ________.

A
Singapore

B
South Africa

C
Japan

D
India

Solution

Double-Declining Method is also popularly known as reducing Balance Method. Under this method, Depreciation is charged on the reduced balance of the assets.
Question 3
1 / -0

Under the diminishing balance method, depreciation amount is a/an ________.

A
Payment

B
Receipt

C
Expenditure

D
None of these
Question 4
1 / -0

Under the diminishing balance method, depreciation is calculated on:

A
Scrap value

B
On original value

C
On book value

D
None of them

Solution

In diminishing balance method, depreciation is calculated on book value of the asset at the start of the year instead of principle amount with fixed percentage. In this, the percentage is same but depreciation amount gradually decreases as it is done on book value.

Hence, Option (C) is the correct answer.
Question 5
1 / -0

Under the fixed installment method of providing depreciation it is calculated on

A
Original cost

B
On balance amount

C
On scrap value

D
None of them

Solution

Fixed installment method of depreciation is also known as Straight line method of providing depreciation. Under this method, the amount of depreciation is constant as it is charged on the original cost of the asset.
Question 6
1 / -0

Dinesh Garments purchased a machine for Rs. 50,000 and spent Rs. 6,000 on its erection. On the date of purchase, it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be Rs. 6000. The amount of depreciation for second year on straight-line basis is:

A
Rs. 5,000

B
Rs. 6,000

C
Rs. 5,600

D
Rs. 6,200

Solution

Depreciation as per straight line $$ =$$ {Cost - Residual value}/{Useful life}
$$= 56000-6000/10 = 5000$$
Question 7
1 / -0

Under straight line method, depreciation is calculated on:

A
Written Down Value

B
Salvage Value

C
Original Cost

D
Market Value

Solution

Depreciation is calculated on Original Cost in case of straight line method.In straight line depreciation method, depreciation is charged uniformly over the life of an asset. We first subtract residual value of the asset from its cost to obtain the depreciable amount. The depreciable amount is then divided by useful life of the asset in number of accounting years to obtain depreciation expense per accounting year.
Question 8
1 / -0

Madhur and Company purchases a machine for a certain sum. The company has a policy of charging 8% depreciation on written down value. The depreciated value of the machine after three years in the books of Madhur and Company is Rs. 3,89,344. What was the purchase value of machine.

A
Rs. 5,00,000

B
Rs. 4,60,000

C
Rs. 4,23,000

D
Rs. 5,52,000

Solution

W.D.V. at machine at the end of 3rd year = Rs. $$3,89,344$$
W.D.V. of machine at the beginning of 3rd year will be = 389344/100-8%= 389344/92%
= 423200
W.D.V. of machine at the beginning of 2nd year will be = 423200/92%= 4,60,000
W.D. V. of machine at the beginning of 1st year will be (or purchase value)= 4,60,00/92%= 5,00,000
Question 9
1 / -0

Under which of the following method of depreciation charged does not declines?

A
Fixed instalment method

B
Sum of year digit method

C
Double decline method

D
All of the above

Solution

Fixed installment method is one of the methods of allocating depreciation. In this method, every year a fixed amount of depreciation is deducted from the value of assets and the same amount is debited to profit and loss account. The book value of the assets is reduced to zero at the end of the expected life.
Question 10
1 / -0

Dinesh Garments purchased a machine for Rs. 50,000 and spent Rs. 6,000 on its creation. On the date of purchase it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be Rs. 6,000. The amount of depreciation for each year on straight line basis is :

A
Rs. 5,000

B
Rs. 5,600

C
Rs. 6,000

D
None of the above.

Solution

Depreciation = (Cost - Residual value)/Useful life Depreciation $$ = 56000-6000/10 = 5000$$

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Depreciation Test 13

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Depreciation Test 13

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Question 1

constant each year

declines each year

increases each year

None of these

Solution

Question 2

Singapore

South Africa

Japan

India

Solution

Question 3

Payment

Receipt

Expenditure

None of these

Question 4

Scrap value

On original value

On book value

None of them

Solution

Question 5

Original cost

On balance amount

On scrap value

None of them

Solution

Question 6

Rs. 5,000

Rs. 6,000

Rs. 5,600

Rs. 6,200

Solution

Question 7

Written Down Value

Salvage Value

Original Cost

Market Value

Solution

Question 8

Rs. 5,00,000

Rs. 4,60,000

Rs. 4,23,000

Rs. 5,52,000

Solution

Question 9

Fixed instalment method

Sum of year digit method

Double decline method

All of the above

Solution

Question 10

Rs. 5,000

Rs. 5,600

Rs. 6,000

None of the above.

Solution

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