Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 14

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following Schedule of the Companies Act, $$2013$$ deals with depreciations?

A
Schedule II

B
Schedule V

C
Schedule XIII

D
Schedule X
Question 2
1 / -0

Under the __________ method of charging depreciation , depreciation is calculated on original cost.

A
Straight line

B
Diminishing balance

C
Annuity

D
Insurance policy

Solution

Straight line method of depreciation is the one where the rate of depreciation for every year is charged on the original cost of the asset.
The formula for calculating the amount of depreciation under straight line method is also based on the original cost as follows:
Depreciation = (Original Cost - Residual value) / Useful life.
Question 3
1 / -0

According to Accounting Standard-6 which of the following is not required to be disclosed in the financial statement?

A
Historical cost of the asset

B
Depreciated value of the asset

C
Accumulated depreciation

D
Total depreciation for the period for each class of asset

Solution

AS-6 deals with depreciation of the tangible asset. Hence, only the historical cost, accumulated depreciation on the asset and total depreciation for the period for each class of asset will be recorded. Depreciable value of asset is not to be disclosed according to AS-6.
Question 4
1 / -0

Net book value of a fixed asset is its_____________.

A
Historical cost

B
Historical cost less accumulated deprecation

C
Historical cost less gross book value

D
Fair market value

Solution

Net Book Value is the value of fixed assets after deducting the accumulated depreciation, and accumulated impairment expenses from original cost of fixed assets. Accumulated depreciation expenses are the total depreciation expenses of assets from the beginning to the reporting date.
Question 5
1 / -0

Which of the following assets is usually assumed not to depreciate?

A
Land

B
Building

C
Plant

D
Furniture

Solution

The land is usually assumed not to depreciate because the land is assumed to have an unlimited useful life.
Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the cost of those assets must be allocated to those limited accounting periods. Since land's life is not limited, there is no need to allocate the cost of land to any accounting period.
Question 6
1 / -0

Which of the following items are capitalized along with the purchase price of the fixed asset?

A
Import duties

B
Initial delivery and handling costs

C
Trade discounts

D
(A) and (B)

Solution

Initial delivery and handling costa and trade discounts are capitalized along with the purchase price of the fixed assets.
All the cost incurred to bring the machinery in state of being used or to put machinery to use are included in the cost of machinery and discount received is reduced from the cost of the asset.
Question 7
1 / -0

Gross book value of a fixed asset is its___________.

A
Cost less depreciation

B
Historical cost

C
Historical cost less accumulated deprecation

D
Fair market value

Solution

Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value.
Question 8
1 / -0

According to Accounting Standard-6, depreciation is to be provided on the basis of _____________.

A
Historical cost of the asset

B
Market price of the asset

C
Replacement cost of asset

D
Any of the above

Solution

According to Accounting standard-6, depreciation is to be provided on the basis of the historical cost of the asset.
The historical cost of a depreciable asset represents its money outlay, or it's equivalent in connection with its acquisition, installation and commissioning as well as for additions to or improvement thereof.
The historical cost of a depreciable asset may undergo subsequent changes arising as a result of an increase or decrease in long term liability on account of exchange fluctuations, price adjustments, changes in duties or similar factors.
Question 9
1 / -0

Accounting Standard-6 relating to depreciation is not applicable on ____________.

A
Building

B
Plant and machinery

C
Live stock

D
Patents

Solution

Accounting standard-6, relating to depreciation is not applicable to the following items to which special considerations apply:
1. Forest, plantation, and similar regenerative natural resources.
2. Wasting assets including expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources.
3. Expenditure or research and develepoment.
4. Goodwill.
5. Live stock.
The statement also does not apply to land unless it has a limited useful life for the enterprise.
Question 10
1 / -0

Where depreciable assets are revalued, then according to Accounting Standard-6 depreciation amount should be based on____________.

A
Historical cost and profit on revaluation should be transferred to P and L a/c

B
Revalued amount

C
Depreciated value of the asset

D
Accounting Standard-6 does not specify anything in this regard

Solution

AS-6 deals with depreciation on fixed assets hence, depreciable assets are revalued, then depreciation amount should be based on revalued amount of the asset.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 14

Result

Depreciation Provisions and Reserves Test - 14

Score

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Rank

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SHARING IS CARING

Question 1

Schedule II

Schedule V

Schedule XIII

Schedule X

Question 2

Straight line

Diminishing balance

Annuity

Insurance policy

Solution

Question 3

Historical cost of the asset

Depreciated value of the asset

Accumulated depreciation

Total depreciation for the period for each class of asset

Solution

Question 4

Historical cost

Historical cost less accumulated deprecation

Historical cost less gross book value

Fair market value

Solution

Question 5

Land

Building

Plant

Furniture

Solution

Question 6

Import duties

Initial delivery and handling costs

Trade discounts

(A) and (B)

Solution

Question 7

Cost less depreciation

Historical cost

Historical cost less accumulated deprecation

Fair market value

Solution

Question 8

Historical cost of the asset

Market price of the asset

Replacement cost of asset

Any of the above

Solution

Question 9

Building

Plant and machinery

Live stock

Patents

Solution

Question 10

Historical cost and profit on revaluation should be transferred to P and L a/c

Revalued amount

Depreciated value of the asset

Accounting Standard-6 does not specify anything in this regard

Solution

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