Depreciation Test 21

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Depreciation Test 21

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Question 1
1 / -0

An asset is subject to $$10\%$$ depreciation on reducing balance method. If the annual depreciation for the year $$2013-14$$ amounts to Rs. $$4500$$. The book value of the asset as on $$31.03.14$$ will be ___________.

A
Rs. $$45,000$$

B
Rs. $$40,500$$

C
Rs. $$50,000$$

D
Rs. $$48,000$$

Solution

WDV is a method of depreciation in which a fixed rate of depreciation is charged on the book value of the asset, over its useful life. The amount of depreciation goes on decreasing every year.

Annual depreciation for the year 2013-14 amounts to Rs. 4,500
Rate of depreciation = 10%
So, if Rs. 4,500 is 10% then how much will be the amount of book value on 31.03.13 i.e. 100%
Book value = (Rs. 4,500 x 100)/10 = Rs. 45,000
Book value on 31.03.14 = Book value on 31.03.13 - Depreciation of year 2013-14
Book value on 31.03.14 = Rs.45,000 - Rs.4,500
Book value on 31.03.14 = Rs.40,500
Question 2
1 / -0

An asset is subject to $$10\%$$ depreciation on reducing balance method. If the annual depreciation for the year $$2013-14$$ amounts to Rs. $$4500$$. The book value of the asset as on $$01.04.13$$ will be __________.

A
Rs. $$45,000$$

B
Rs. $$40,500$$

C
Rs. $$50,000$$

D
Rs. $$48,000$$

Solution

Annual depreciation for the year 2013.-14 amounts to Rs. 4,500
Rate of depreciation = 10% on WDV
So, if Rs. 4,500 is 10% then how much will be the amount of book value on 31-03-2013 i.e. 100%
Book value on 01.04.13 = (Rs. 4,500 x 100)/10 = Rs. 45,000
Question 3
1 / -0

An asset was shown in the Balance sheet during the last three years at Rs. $$50000$$, Rs. $$45000$$ and Rs. $$40500$$. Find the depreciation for the $$4$$th year ___________.

A
Rs. $$4000$$

B
Rs. $$5000$$

C
Rs. $$4050$$

D
Rs. $$4500$$

Solution

WDV is a method of depreciation in which a fixed rate of depreciation is charged on the book value of the asset, over its useful life. The amount of depreciation goes on decreasing every year. In the given question the amount of depreciation decreased in every year hence, company is following WDV method of depreciation. The rate of depreciation charge is 10%.

1st year's book value = Rs. 50,000
2nd year's book value = Rs.45,000
Difference between two year book value =Rs. 5,000
Rate of depreciation = Rs.5,000/Rs.50,000 = 10%
Hence, Depreciation of 4th year = Rs.40,500 x 10% = Rs. 4,050
Question 4
1 / -0

Which of the following is a true statement?

A
Under Income-tax Act reducing balance method of depreciation is allowed

B
Land is subject to depreciation at a very nominal rate

C
Depreciation is the process of valuation of the assets

D
Depreciation is a cash expense

Solution

Option A is correct. Income Tax Act believes in writing off an asset according to the benefits received from it. Generally either the revenues tend to fall continuously on year to year basis or revenues remain the same but repair and maintenance cost begin to rise. Due to matching concept, in general, written down value method of depreciation is there under the Income Tax Act, 1961.
Question 5
1 / -0

Calculate the rate of depreciation under the Straight Line method from the following details.
Cost of acquisition of the Machine Rs. $$140,000$$, Estimated scrap value at the end of $$10$$ years Rs. $$7,500$$, useful life of the Machine $$10$$ years.

A
$$9.83\%$$

B
$$10.55\%$$

C
$$9.87\%$$

D
$$9.46\%$$

Solution
Question 6
1 / -0

An asset is subject to $$10\%$$ depreciation on reducing balance method. If the book value of the asset as on $$31.03.13$$ is Rs. $$45000$$. The Book value of the Asset as on $$31.03.15$$ will be ___________.

A
Rs. $$40,500$$

B
Rs. $$36,450$$

C
Rs. $$50,000$$

D
Rs. $$48,000$$

Solution

Rate of depreciation = 10% on WDV
The book value of the asset on 31.03.14 is Rs. 45,000
Book value of the asset as on 31.03.14 = Rs. 45,000 - (10% x Rs. 45,000) = Rs. 40,500
Book value of the asset as on 31.03.15 = Rs. 40,500 - (10% Rs. 40,500) = Rs. 36,450
Question 7
1 / -0

Q.Ltd acquired machinery on $$1$$st January $$2011$$ at a cost of Rs$$72,000$$ and spent Rs$$8,000$$ for its installation. The firm writes off depreciation at $$10\%$$ p.a on the original cost every year. The books are closed on $$31$$st December every year. Closing balance of machinery for $$1$$st & $$2$$nd year as per fixed instalment method will be Rs............

A
$$72,000, 64,000$$

B
$$74,000, 66,600$$

C
$$74,000, 72,000$$

D
$$74,000, 66,000$$
Question 8
1 / -0

Which of these is an example of accelerated method of depreciation.

A
Written down value method

B
Straight line method

C
Sinking fund method

D
Annuity method

Solution

Accelerated depreciation is a method used because of its greater depreciation expenses in early years of the asset.
Accelerated depreciation methods are
1. Double declining method/Reducing balance method
2.Sum of the years' digit method
3.Written down value method.
Therefore option A is correct.
Question 9
1 / -0

Depreciable value of an asset is equal to _________.

A
Cost + Scrap value

B
Cost + Market price

C
Cost - Scrap value

D
None of them

Solution

The depreciable cost is the cost of an asset that can be depreciated over time. It is equal to the acquisition cost of the asset minus its estimated salvage value at the end of its useful life.
Hence, the correct option is C.
Question 10
1 / -0

ABC Ltd, acquired a new Machine for Rs. $$500,000$$ on $$1$$st April $$2010$$ and spent Rs. $$20,000$$ on its installation and Rs. $$5,000$$ on transportation. The firm charges depreciation at $$10\%$$ on WDM method. The depreciation charges for 2010-11 will be ___________.

A
Rs. $$50,000$$

B
Rs. $$52,500$$

C
Rs. $$47,250$$

D
Rs. $$47,650$$

Solution

Depreciable cost of machine = Purchase cost + Installation cost + Transportation
Depreciable cost of machine = Rs. 5,00,000 + Rs. 20,000 + Rs. 5,000 = Rs. 5,25,000
Depreciation of 2010-11 =Rs. 5,25,000 x 10% = Rs. 52,500

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Depreciation Test 21

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Question 1

Rs. $$45,000$$

Rs. $$40,500$$

Rs. $$50,000$$

Rs. $$48,000$$

Solution

Question 2

Rs. $$45,000$$

Rs. $$40,500$$

Rs. $$50,000$$

Rs. $$48,000$$

Solution

Question 3

Rs. $$4000$$

Rs. $$5000$$

Rs. $$4050$$

Rs. $$4500$$

Solution

Question 4

Under Income-tax Act reducing balance method of depreciation is allowed

Land is subject to depreciation at a very nominal rate

Depreciation is the process of valuation of the assets

Depreciation is a cash expense

Solution

Question 5

$$9.83\%$$

$$10.55\%$$

$$9.87\%$$

$$9.46\%$$

Solution

Question 6

Rs. $$40,500$$

Rs. $$36,450$$

Rs. $$50,000$$

Rs. $$48,000$$

Solution

Question 7

$$72,000, 64,000$$

$$74,000, 66,600$$

$$74,000, 72,000$$

$$74,000, 66,000$$

Question 8

Written down value method

Straight line method

Sinking fund method

Annuity method

Solution

Question 9

Cost + Scrap value

Cost + Market price

Cost - Scrap value

None of them

Solution

Question 10

Rs. $$50,000$$

Rs. $$52,500$$

Rs. $$47,250$$

Rs. $$47,650$$

Solution

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