Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 36

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Weekly Quiz Competition

Question 1
1 / -0

Which of the following assets does not depreciate?

A
Plant and Machinery

B
Land

C
Furniture

D
Patents

Solution

Depreciation means a fall in the value of an asset. The net result of an asset's depreciation is that sooner or later the asset will becomes useless. However, land is not considered to depreciate at all.
Question 2
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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 3
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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 4
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Assessment of depreciation and the amount to be charged in respect thereof in a accounting period are usually not base on ___________.

A
Market value of the asset

B
Historical cost or other amount substituted for the historical cost of the depreciable asset when the asset had been revalued

C
Expected useful life of the depreciable assets

D
Estimated residual value of the depreciable asset

Solution

Option A is the correct one.
Assessment of Depreciation we will consider the following components
1.Historical cost ( including installation expenses)
2.expected useful life
3. Residual value
Note: depreciation not charged on market value.
Question 5
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'Useful life' of an asset is ___________.

A
The period over which a particular activity will be carried out

B
The period over which a depreciable asset is expected to be used by the enterprise

C
$$10$$ years

D
None of the above

Solution

Useful life of a depreciable asset implies either the period over which a depreciable asset is expected to be used by the enterprise or the number of production or similar units expected to be obtained from the use of the asset by the enterprise.
Question 6
1 / -0

The useful life of a depreciable asset depends on ___________.

A
legal or contractual limits

B
extent of use and physical deterioration on account of wear and tear

C
obsolescence

D
all of the above
Question 7
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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 8
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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.
Question 9
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Depreciation arises from:

A
Natural calamities.

B
Inflation.

C
Physical wear and tear.

D
Fall in the market value of asset.

Solution

Option C is the correct one.
Reason for the charging depreciation on Fixed Assets.
1. Physical wear and tear(due to using)
2. Passes the time.
3. Change in technology.
Therefore, the correct option is Physical wear and tear.

Question 10

1 / -0

Match the followings:

List I	List II
A. Amortization	1. Diminution in the life of the asset due to excessive use
B. Depreciation	2. Exhaustion of natural resources
C. Depletion	3. Expiration of tangible assets
D. Obsolescence	4. Expiration of intangible assets
	5. Economic deterioration due to improved inventions

$$A = 1, B = 2, C = 3, D = 4$$

$$A = 1, B = 2, C = 4, D = 5$$

$$A = 5, B = 2, C = 3, D = 4$$

$$A = 4, B = 3, C = 2, D = 5$$

Solution

Option D is the correct one.

1. Depreciation charged on fixed tangible assets.ex. Machinery, Furniture, etc

2. Amortization charged on fixed intangible assets. ex Goodwill copyright etc

3. Depletion charged on natural resources ex. coal mines etc

4. Obsolescence is economic deterioration due to improved inventions.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 36

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Depreciation Provisions and Reserves Test - 36

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SHARING IS CARING

Question 1

Plant and Machinery

Land

Furniture

Patents

Solution

Question 2

Straight line

Diminishing value

Sum of years' digit

Sinking fund

Question 3

Rs. $$6,200$$

Rs. $$5,800$$

Rs. $$5,600$$

Rs. $$5,400$$

Solution

Question 4

Market value of the asset

Historical cost or other amount substituted for the historical cost of the depreciable asset when the asset had been revalued

Expected useful life of the depreciable assets

Estimated residual value of the depreciable asset

Solution

Question 5

The period over which a particular activity will be carried out

The period over which a depreciable asset is expected to be used by the enterprise

$$10$$ years

None of the above

Solution

Question 6

legal or contractual limits

extent of use and physical deterioration on account of wear and tear

obsolescence

all of the above

Question 7

$$Rs. 10,000$$

$$Rs. 30,000$$

$$Rs. 50,000$$

$$Rs. 70,000$$

Solution

Question 8

Same every year

Reduced every year

Increased every year

All of these

Solution

Question 9

Natural calamities.

Inflation.

Physical wear and tear.

Fall in the market value of asset.

Solution

Question 10

$$A = 1, B = 2, C = 3, D = 4$$

$$A = 1, B = 2, C = 4, D = 5$$

$$A = 5, B = 2, C = 3, D = 4$$

$$A = 4, B = 3, C = 2, D = 5$$

Solution

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