Depreciation Test 20

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Depreciation Test 20

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Weekly Quiz Competition

Question 1
1 / -0

Asset purchase in 2008 at $$Rs.10000$$. The depreciation amount for $$2$$ years @$$10$$% p.a under straight line method ____________.

A
$$Rs.1000$$

B
$$Rs.2000$$

C
$$Rs.1900$$

D
$$Rs.4000$$

Solution

Depreciation for 1st year = 10000 * 10 /100 = 1000
Deprecation for 2nd year= 10000 * 10 /100 = 1000 ( calculate on original cost always in all subsequent years)
total Depreciation = 2000
Question 2
1 / -0

An asset was purchased in $$2010$$ at $$Rs.10000$$. Calculate the opening balance amount after $$2$$years when depreciation is charged @$$10$$% p.a. under the straight line method.

A
Rs.8,000

B
Rs.8,100

C
Rs.9,000

D
Rs.10,000

Solution

Under the Straight-line method, depreciation is calculated at a percentage is given on a fixed amount basis.
In the given situation:
Cost of the asset Rs.10000
Depreciation @ 10% for first year Rs. 1000
--------------
Opening Balance in the second year Rs.9000
Depreciation @ 10% for second year Rs. 1000
--------------
Opening Balance in the 3rd year Rs.8000
----------------
Question 3
1 / -0

Asset purchased on 1st September 2020 for $$Rs.15000$$. Calculate depreciation as on 31 March 2021 on the asset, rate of depreciation is 12% ____________.

A
Rs.1050

B
Rs.1075

C
Rs.1875

D
Rs.13125

Solution

Cost of Assets Rs.15000
Rate of depreciation @12%
Depreciation for the year 12% on Rs.15000 i.e. Rs.1800
Asset purchase on 1st September, hence depreciation has to be charged for 7 months.

Depreciation for 7 month will be = Rs.1200 *7
12
= Rs.1050.
Question 4
1 / -0

On January 1, 1992, there was a balance of Rs. 4,000 in the plant and machinery account. An addition of Rs. 2,000 was made on July 1, 1992. Accounts were closed for the year on December 31, 1992. If depreciation was charged at 10% per annum, the balance in the plant and machinery account on the closing date would be:

A
Rs. 5,300

B
Rs. 5,400

C
Rs. 5,500

D
Rs. 5,600

Solution

Option C is correct.
Depreciation on 4000 of 10% = 400.
On 2000 depreciation will be calculated for 6 months.
2000*10%*6/12 = 100.
Total Depreciation = 500.
Balance in plant and machinery account on the closing date would be
4000+2000 - 500 = 5500.
Question 5
1 / -0

The written down method is based on __________________ assumption of same amount.

A
Faulty

B
Realistic

C
Invalid

D
None of the above

Solution

This method is based on the assumption that in the earlier years the cost of repairs to the assets is low and hence more amount of depreciation should be charged. Also, in the later years, the cost of repairs will increase and therefore less amount of depreciation shall be provided.
Question 6
1 / -0

An asset is purchased in 2020 at Rs.10,000. Calculate the book value of the asset after 2 years, when depreciation is charged @ 10% p.a. under the straight-line method.

A
$$Rs. 8,100$$

B
$$Rs.8,000$$

C
$$Rs.9,000$$

D
$$Rs.8,570$$

Solution

Depreciation under straight line method and written down value method will be calculated as under:

SLM WDV Method
Cost of Assets: 10000 10000
Depreciation Year I @10% 1000 1000
----------------- ------------------
Balance 9000 9000
Depreciation Year II @10% 1000 900
----------------- ------------------
Balance after 2 years 8000 8100
---------------- -----------------
Question 7
1 / -0

An asset is subject to $$10\%$$ depreciation on reducing balance method. If the book value of the asset as on $$31.03.14$$ is Rs. $$40500$$. The annual depreciation for the year $$2013-14$$ amounted to __________.

A
Rs. $$4,500$$

B
Rs. $$4,050$$

C
Rs. $$50,00$$

D
Rs. $$48,00$$

Solution

Book value on 31.03.14 = Rs. 40,500
Rate of depreciation = 10% on WDV
So, if 40,500 is 90% then how much will be the amount of annual depreciation on 31.03.13, i.e. 10% annual depreciation for the year 2013-14 = (Rs. 40,500 x 10)/90 = Rs. 4,500
Question 8
1 / -0

XYZ purchased a plant having estimated useful life of $$15$$ years, however after $$5$$ year the remaining life of the asset is revised to $$5$$ years. Rs. $$40,000$$ being the remaining depreciable amount will be charged/allocated over ____________.

A
$$5$$ years

B
$$10$$ years

C
immediately

D
charged to revaluation a/c

Solution

Where their is a revision of the estimated useful life of an asset, the unamortised depreciation amount should be charged over the revised remaining useful life.
Remaining depreciable amount after 5 yrs. = Rs. 40,000
Remaining life of asset revised to = 5 years
Hence, the remaining depreciable amount will be charged over 5 years.
Question 9
1 / -0

___________ of depreciation takes into account interest on capital outlay.

A
Sum of digit method

B
Annuity method

C
Depletion method

D
Straight line method

Solution

The annuity method of depreciation is also referred as the compound interest method of depreciation. If the cash flow of the asset being depreciated is constant over the life of the asset, then this method is called the annuity method. This method of depreciation takes into account interest on capital outlay.
Question 10
1 / -0

The pattern of annual depreciation charge of an asset for the three years was Rs. $$5000$$, Rs. $$4500$$ and Rs. $$4050$$. Discuss the rate of depreciation charge.

A
$$15\%$$ on WDV

B
$$15\%$$ on SLM

C
$$10\%$$ on WDV

D
$$90\%$$ on WDV

Solution

Under the SLM method of depreciation, the amount of depreciation is constant over the estimated working life of an asset.

Under the reducing balance method of depreciation, the amount of depreciation reduces every year as the book value of the asset reduces and the depreciation is charged on the book value of the assets.

In the given case, depreciation is reducing every year, that means the organization is following the written down value method @10%

For first year the amount of depreciation is Rs. 5000 which is 10% of Rs.50000.

Accordingly,

Cost of machine Rs.50000
Less: Depreciation @10% Rs. 5000
-----------------
WDV Rs.45000
Less: Depreciation @10% Rs. 4500
----------------
WDV Rs.40500
Less: Depreciation Rs. 4050

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Depreciation Test 20

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Depreciation Test 20

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Question 1

$$Rs.1000$$

$$Rs.2000$$

$$Rs.1900$$

$$Rs.4000$$

Solution

Question 2

Rs.8,000

Rs.8,100

Rs.9,000

Rs.10,000

Solution

Question 3

Rs.1050

Rs.1075

Rs.1875

Rs.13125

Solution

Question 4

Rs. 5,300

Rs. 5,400

Rs. 5,500

Rs. 5,600

Solution

Question 5

Faulty

Realistic

Invalid

None of the above

Solution

Question 6

$$Rs. 8,100$$

$$Rs.8,000$$

$$Rs.9,000$$

$$Rs.8,570$$

Solution

Question 7

Rs. $$4,500$$

Rs. $$4,050$$

Rs. $$50,00$$

Rs. $$48,00$$

Solution

Question 8

$$5$$ years

$$10$$ years

immediately

charged to revaluation a/c

Solution

Question 9

Sum of digit method

Annuity method

Depletion method

Straight line method

Solution

Question 10

$$15\%$$ on WDV

$$15\%$$ on SLM

$$10\%$$ on WDV

$$90\%$$ on WDV

Solution

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