Depreciation Test 15

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Depreciation Test 15

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following is/are advantage of Reducing balance method/WDV method?

A
Under this method it is easy to calculate depreciation rate.

B
Income tax authorities do not accepts this method

C
The efficiency and usefulness is more in early years so depreciation amount is also more in early years and goes on diminishing year to year.

D
All of the above

Solution

The reducing balance method -- which depreciates assets more ... front-loads more depreciation into the first years of an asset's life. ... Under the reducing balance method, the asset is depreciated at a higher percentage rate than it straight line and 20 percent a year under double declining balance.
Question 2
1 / -0

Which of the following is correct formula for charging depreciation under fixed instalment method?

A
Depreciation = $$\frac{Scrap Value - Original cost}{Life of the asset}$$

B
Depreciation = $$\frac{Life of the asset - Scrap Value}{Original cost}$$

C
Depreciation = $$\frac{Original Cost - Scrap Value}{Life of the asset}$$

D
Depreciation = $$\frac{Scrap Value - Life of the asset}{Original cost}$$

Solution

Fixed Installment Method or Equal Installment Method or Straight Line Method or Fixed Percentage or Original Cost Method: In this method a fixed or equal amount of depreciation written off as depreciation at the end of each year, during the life time of the asset.
Question 3
1 / -0

N.Ltd. purchase Machinery for Rs$$10,00,000$$ on $$1.1.2012$$. Installation expenses were Rs$$50,000$$. Life of the asset is $$6$$ years at the end of which asset can be sold at Rs$$30,000$$. Annual depreciation under straight line method will be =?

A
$$1,80,000$$

B
$$1,66,667$$

C
$$1,70,000$$

D
$$1,71,667$$
Question 4
1 / -0

Which of the following is/are advantage of fixed instalment method of charging depreciation?

A
This method is acceptable to income tax authorities.

B
The value of the asset can be completely written off, i.e the value can be reduced to zero.

C
The efficiency and usefulness is more in early years so depreciation amount is also more in early years and goes on diminishing year to year.

D
All of the above.

Solution

The annual depreciation charge in SLM remains fixed during the life of the asset. In straight line method, the book value of the asset is completely written off i.e. the asset value is reduced to zero or its salvage value. Conversely, the asset's book value is not completely written off in written down value method.
Question 5
1 / -0

Which of the following is/are cannot be treated as advantage of fixed instalment method of charging depreciation?

A
It is a simple and easy method.

B
It takes into account the effective utilization of the asset.

C
This method can be applied where asset gets depreciated because of effluxion of time like furniture, equipments, patents, leasehold etc.

D
All of the above

Solution

Fixed installment method does not take into consideration the seasonal fluctuations in the use of fixed assets. In this method of Depreciation Equal amount of Depreciation is charged even though the capacity of the machine declines every year.
Question 6
1 / -0

Original cost = Rs$$88,200$$. Salvage value = $$4,200$$. Useful Life = $$3$$ years. Depreciation rate = ?

A
$$33.333\%$$

B
$$31.746\%$$

C
$$34.921\%$$

D
None of the above
Question 7
1 / -0

A machine was purchased on 1st January 2013 for Rs 25,000 and is to be depreciated at 30 % p.a. based on reducing balance method. If the company closes books of account on 31st March every year, what would be the net book value of the equipment as at 31st December, 2014?

A
Rs.$$12,250$$

B
Rs.$$10,000$$

C
Rs.$$17,750$$

D
Rs.$$12,545$$

Solution

Purchase Price of Machine on 1.01.2013 = Rs 25,000

Rate of Depreciation = 30% p.a

Calculation of depreciation as at 31st December 2014

Original cost as on 1.01.2013 = Rs 25,000

Less: Depreciation at the end

as on 31.3.2013

(25,000 X 30% X 3/12)            = Rs (1875)

Book Value as on 1.01.2013 = Rs 23125

Less: Depreciation at the end

On 31.3.2014                          = Rs (6937)

Book Value on 31.12.2014      = Rs 16187.5

Less: Depreciation till

31.12.2014                              = Rs (3642.18)

Book Value as at 31.12.2014   = Rs 12545.3
Question 8
1 / -0

Original cost = Rs$$12,00,000$$. Salvage value = Rs$$2,00,000$$. Useful Life = $$10$$ years. Annual depeciation = ? & rate of depreciation = ?

A
$$Rs1,00,000 & 10\%$$

B
$$Rs1,00,000 & 8.33\%$$

C
$$Rs1,20,000 & 12\%$$

D
$$Rs1,20,000 & 8.33\%$$
Question 9
1 / -0

Hi-Fi Ltd acquired machinery on 1st January 2012 at a cost of Rs36,000 and spent Rs.4,000 for its installation. The firm writes off depreciation at 10% p.a. on WDV basis. The books are closed on 31st December. Depreciation for 1st& 2nd year will be Rs________ & Rs_______.

A
$$3,600, 3,240$$

B
$$4,000, 3,600$$

C
$$3,600, 4,000$$

D
$$3,240, 2,916$$

Solution

Total cost of machinery = 36,000 + 4,000
= RS. 40,000.
Depreciation for 1st year :- (WDV method)
= 40,000 x 10/100
= RS-4,000.
Depreciation for 2nd year :- (WDV method)
= (40,000 - 4,000) 36,000 x 10/100
= RS-3,600.
Question 10
1 / -0

On 1.8.2012 K Ltd. bought four Matador Vans costing Rs 1,20,000 each.
The company expected to fetch a scrap value of 25% of the cost price of the vehicles after 10 years. The vehicles were depreciated under the fixed installment method up to 31.3.2015. The rate of depreciation charged up to 31.3.2015 = ?

A
$$10.0\%$$

B
$$9.0\%$$

C
$$8.5\%$$

D
$$7.5\%$$

Solution

Rate of depreciation = depreciation
---------------------- x 100
value of asset
   = 9,000(WN)
   ------------------    x 100
   1,20,000
= 7.5 %
Working note:-
1) Depreciation on SLM basis = value of asset - scrap value
   ----------------------------------------
useful life
   = 1,20,000 - 30,000(25% of 1,20,000)
   -----------------------------------------------------
   10 years
   = RS-9,000.

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Depreciation Test 15

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Depreciation Test 15

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Question 1

Under this method it is easy to calculate depreciation rate.

Income tax authorities do not accepts this method

The efficiency and usefulness is more in early years so depreciation amount is also more in early years and goes on diminishing year to year.

All of the above

Solution

Question 2

Depreciation = $$\frac{Scrap Value - Original cost}{Life of the asset}$$

Depreciation = $$\frac{Life of the asset - Scrap Value}{Original cost}$$

Depreciation = $$\frac{Original Cost - Scrap Value}{Life of the asset}$$

Depreciation = $$\frac{Scrap Value - Life of the asset}{Original cost}$$

Solution

Question 3

$$1,80,000$$

$$1,66,667$$

$$1,70,000$$

$$1,71,667$$

Question 4

This method is acceptable to income tax authorities.

The value of the asset can be completely written off, i.e the value can be reduced to zero.

The efficiency and usefulness is more in early years so depreciation amount is also more in early years and goes on diminishing year to year.

All of the above.

Solution

Question 5

It is a simple and easy method.

It takes into account the effective utilization of the asset.

This method can be applied where asset gets depreciated because of effluxion of time like furniture, equipments, patents, leasehold etc.

All of the above

Solution

Question 6

$$33.333\%$$

$$31.746\%$$

$$34.921\%$$

None of the above

Question 7

Rs.$$12,250$$

Rs.$$10,000$$

Rs.$$17,750$$

Rs.$$12,545$$

Solution

Question 8

$$Rs1,00,000 & 10\%$$

$$Rs1,00,000 & 8.33\%$$

$$Rs1,20,000 & 12\%$$

$$Rs1,20,000 & 8.33\%$$

Question 9

$$3,600, 3,240$$

$$4,000, 3,600$$

$$3,600, 4,000$$

$$3,240, 2,916$$

Solution

Question 10

$$10.0\%$$

$$9.0\%$$

$$8.5\%$$

$$7.5\%$$

Solution

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