Depreciation Test 8

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Depreciation Test 8

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Weekly Quiz Competition

Question 1
1 / -0

Original cost of an asset was Rs. $$2,52,000$$. Salvage value was $$12,000$$. Depreciation for 2nd year @$$10$$% p.a under WDV method will be

A
$$21,600$$

B
$$22,680$$

C
$$30,000$$

D
$$28,000$$

Solution

Calculation of depreciation under WDV method :
Original cost of asset 252000
Less : Depreciation for first year @ 10% (25200) WDV of asset in second year 226800
Less : Depreciation for second year @ 10% (22680)
WDV of asset in third year 204120
Thereore depreciation of asset at the of second year of cost Rs. 252000 @ 10% is Rs. 22680.
Question 2
1 / -0

J.P. Ltd. purchased a machine for Rs. 15,000 on 1st April 1997, Depreciation is .provided @ 10% on written down value method. Depreciation for 1998-99 will be:

A
Rs. 750

B
Rs. 1,350

C
Rs. 1000

D
Rs. 1,900

Solution

Calculation of depreciation under WDV method :
Original cost of asset Rs. 15000
Less : depreciation @ 10% p.a for first year (1500)
WDV of Asset for second year 13500
Less : depreciation @ 10% p.a for second year (1350)
WDV of Asset for third year 12150

Therefore, depreciation for second year under written down value method of machine cost Rs. 15000 @ 10% is Rs. 1350
Question 3
1 / -0

Original cost of an asset was Rs. $$1,00,000$$. Life 5 years. Expected salvage value was Rs. 5,000. Hence Depreciation for 3rd year as per straight line method is ___________.

A
Rs. $$8,550$$

B
Rs. $$20,000$$

C
Rs. $$19,000$$

D
Rs. $$26,250$$

Solution

Option C is correct. In straight line method, depreciation charged remains same for every year. Depreciation is calculated as:
Cost price - salvage value / Estimated life of depreciation
1,00,000 - 5000 /5
= 19000
Depreciation for 3rd year will be - 19000.
Question 4
1 / -0

Amit Ltd. purchased a machine on $$01.01.2003$$ for Rs. $$1,20,000$$. Installation expenses were Rs. $$10,000$$. Residual value after $$5$$ years Rs. $$5,000$$. On $$01.07.2003$$, expenses for repairs were incurred to the extent of Rs. $$2,000$$. Depreciation is provided under straight line method. Depreciation rate is $$10\%$$ Annual Depreciation will be ____________.

A
Rs. $$13,000$$

B
Rs. $$17,000$$

C
Rs. $$21,000$$

D
Rs. $$25,000$$
Question 5
1 / -0

A company imported a machine on 01.07.2002 for Rs. $$64,000$$, paid customs duty and freight Rs. $$32,000$$ and incurred erection charges Rs. $$24,000$$. On 01.07.2004, one third portion of the imported machinery was sold for Rs. $$13,920$$. Depreciation is to be calculate at $$20$$% p.a on straight line basis. Profit/Loss on sale will be:

A
Rs. $$10,080$$ (Profit)

B
Rs. $$9,800$$ (Profit)

C
Rs. $$9,800$$ (Loss)

D
Rs. $$10,080$$ (Loss)

Solution
Question 6
1 / -0

Under which method of depreciation, the value of machinery never comes to zero?

A
Straight line

B
Diminishing value

C
Sum of years' digit

D
Sinking fund
Question 7
1 / -0

An asset is purchased for Rs. $$60,000$$ and Rs. $$2,000$$ is spent on its installation. The useful life of plant is 10 years and the essential scarp value is Rs. $$6,000$$. Annual Depreciation under the original cost method would be _______________.

A
Rs. $$6,200$$

B
Rs. $$5,800$$

C
Rs. $$5,600$$

D
Rs. $$5,400$$

Solution

Option C is correct. In straight line method, depreciation charged remains same for every year.
Purchase Price of machine = 60,000
Installation expenses = 2,000
Total cost of machine = 60,000+2,000
=62,000
Depreciation = Cost Of Machine - salvage value / estimated life of machine
= 62,000 - 6000/ 5
Annual Depreciation = 5600
All the expenses before an asset becomes ready to use is added into asset.
Question 8
1 / -0

Given that the value of furniture on $$1-1-2001$$ is $$Rs. 80,000$$ furniture purchased during the year is $$Rs. 40,000$$, sale of furniture on no loss on profit basis is $$Rs. 20,000$$ and the furniture is valued at $$Rs. 70,000$$ on $$31.12.2001$$, the depreciation for the year $$2001$$ will be _______________.

A
$$Rs. 10,000$$

B
$$Rs. 30,000$$

C
$$Rs. 50,000$$

D
$$Rs. 70,000$$

Solution

Depreciation = opening value + purchase - sale - closing value
= 80000 + 40000 - 20000 - 70000
= 30000.

Question 9

1 / -0

Reducing balance method of depreciation is ____________.

where amount of depreciation does not change from year to year

where amount of depreciation increases every year

where the amount of depreciation decreases every year

none of the above

Solution

Where the amount of depreciation decreases every year.

In written down value method, the depreciation is provided at a predetermined percentage, on the balance cost of asset after deducting the depreciation previously charged. It means under this method, the amount of depreciation changes every year.

For e.g. Cost of asset Rs. 100000

Rate of depreciation 10%

The amount of depreciation for 3 years is calculated as shown below:

Year	Balance cost of asset Rs.	Depreciation	Written down Value (Rs.)
1	100000	10000	90000
2	90000	9000	81000
3	81000	8100	72900

Question 10
1 / -0

Under the straight line method of depreciation, the amount of depreciation is :

A
Same every year

B
Reduced every year

C
Increased every year

D
All of these

Solution

Under straight line method, a fixed amount of depreciation, calculated at a fixed percentage on the original cost fixed depreciable asset is written off during each accounting period over the expected useful life of the asset.

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Depreciation Test 8

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Depreciation Test 8

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Question 1

$$21,600$$

$$22,680$$

$$30,000$$

$$28,000$$

Solution

Question 2

Rs. 750

Rs. 1,350

Rs. 1000

Rs. 1,900

Solution

Question 3

Rs. $$8,550$$

Rs. $$20,000$$

Rs. $$19,000$$

Rs. $$26,250$$

Solution

Question 4

Rs. $$13,000$$

Rs. $$17,000$$

Rs. $$21,000$$

Rs. $$25,000$$

Question 5

Rs. $$10,080$$ (Profit)

Rs. $$9,800$$ (Profit)

Rs. $$9,800$$ (Loss)

Rs. $$10,080$$ (Loss)

Solution

Question 6

Straight line

Diminishing value

Sum of years' digit

Sinking fund

Question 7

Rs. $$6,200$$

Rs. $$5,800$$

Rs. $$5,600$$

Rs. $$5,400$$

Solution

Question 8

$$Rs. 10,000$$

$$Rs. 30,000$$

$$Rs. 50,000$$

$$Rs. 70,000$$

Solution

Question 9

where amount of depreciation does not change from year to year

where amount of depreciation increases every year

where the amount of depreciation decreases every year

none of the above

Solution

Question 10

Same every year

Reduced every year

Increased every year

All of these

Solution

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