Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 42

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Question 1
1 / -0

Original cost = Rs. $$1,26,000$$. Salvage value $$=6,000$$. Useful Life $$=6$$ years. Annual depreciation under SLM = ?

A
Rs. $$21,000$$

B
Rs. $$20,000$$

C
Rs $$15,000$$

D
Rs. $$14,000$$

Solution

Calculation of depreciation under SLM =
Original cost - Salvage Value / Useful Life =
126000 - 6000 / 6 = Rs 20000
Question 2
1 / -0

Directions For Questions

A firm, which depreciates its machinery at $$10$$% p.a on WDV method, had on 1st April, 2002 Rs. $$9,72,000$$ in the debit of machinery account. During the year ended 31st March, 2003, a part of the machinery purchased on 1st April, 2000 for Rs. $$80,000$$ was sold for $$45,000$$ on 1st October, 2002 and new machinery at cost of Rs. $$1,50,000$$ was purchased and installed on the same date, installation charges being Rs. $$8,000$$. On 31st March, 2003, the firm decided to change it method of charging depreciation from WDV method to SLM with effect from April, 2000, the rate of depreciation remaining the same as before.

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Depreciation on machine sold up to 1.10.2002 in year 2002-2003 will be -

A
Rs. $$16,500$$

B
Rs. $$3,240$$

C
Rs. $$11,200$$

D
Rs. $$7,900$$
Question 3
1 / -0

Z Ltd. had balance of Rs. $$4,000$$ in its plant account and corresponding balance of accumulated depreciation account of that plant was Rs. $$3,200$$. This plant was exchanged for new plant. The payment for the new plant consisted of trade-in-allowance of Rs. $$1,400$$ for the old one and the balance Rs. $$4,600$$ to be paid in cash. The old plant could have been sold for Rs. $$1,000$$. In relation to this transaction, which of the following statement is correct?

A
Provision for depreciation account will be credited by Rs. $$3,200$$

B
Rs. $$5,600$$ will be debited to New Plant Account

C
Profit and Loss Account will be debited by Rs. $$200$$

D
All of the above
Question 4
1 / -0

_________ is a secret reserve usually created to, provide for the lose by way of fluctuation in the value of investment.

A
Investment Fluctuation Reserve

B
Foreign Exchange Fluctuation Fund

C
General Reserve

D
Capital Reserve

Solution

Investment Fluctuation Reserve is a reserve created out of the profits to meet the fall in the market value of investments. It is created to adjust the difference between the book value and market value of investment.
Question 5
1 / -0

Extract of trial balance of Mr.S on $$31-3-2015$$ is as follows.
Particulars Dr. Rs. Cr. Rs.
Furniture $$20,000$$ -
Provision for depreciation - $$2,000$$
Addition to furniture on $$31-1-2015$$ $$6,000$$ -
Repair to furniture $$1,000$$
Furniture is depreciated by $$10\%$$ p.a. on original cost. Furniture will be shown in balance sheet at Rs.

A
Rs. $$21,900$$

B
Rs. $$21,400$$

C
Rs. $$16,000$$

D
Rs. $$22,900$$
Question 6
1 / -0

ABC Industries Ltd. purchased a new Machinery on $$1-1-2011$$ for Rs. $$2,75,000$$ and spent Rs. $$25,000$$ on its installation. Machine is subject to $$10\%$$ depreciation on the original cost. The company sold the Machinery on $$31-12-2015$$ for Rs. $$1,45,000$$. Find out the accumulated depreciation on the Machine as on $$31-12-2015$$.

A
Rs. $$1,25,000$$

B
Rs. $$1,35,000$$

C
Rs. $$1,05,000$$

D
Rs. $$1,50,000$$

Solution

Accumulated depn = 30000 + 30000 + 30000 +30000 + 30000 = 150000
Question 7
1 / -0

M & Co. purchased a machine for a certain sum. The firm has a policy of charging $$8$$% depreciation on written down value. The depreciated value of machine after three years is Rs. $$3,89,344$$. Purchase price of machine = ?

A
Rs. $$5,00,000$$

B
Rs. $$4,60,000$$

C
Rs. $$4,23,000$$

D
Rs. $$5,52,000$$
Question 8
1 / -0

Which of the following statements is TRUE?

A
Provision for doubtful debts represents the amount that cannot be collected

B
Cash balance on hand shows whether the business has earned Profit or Loss

C
Free samples received are business gains

D
The WDV of an assets depreciated on the reducing balance method can never become zero
Question 9
1 / -0

A company purchased plant for Rs. $$50,000$$. The useful life of the plant is $$10$$ years and the residual value is Rs. $$5,000$$. The management wants to depreciate it by straight line method. Rate of depreciation will be = ?

A
$$8$$%

B
$$9$$%

C
$$10$$%

D
None of the above

Question 10

1 / -0

While preparing final account, to make provision for discount on debtors. which of the following adjustment entry will be passed?

Provision for Discount on Debtors A/c To Debtors A/c	Dr.
Profit & Loss A/c To Provision for Discount on Debtors A/c	Dr.
Provision for Discount on Debtors A/c To Trading A/c	Dr.
Debtors A/c To provision for Discount on Debtors A/c	Dr.

A

B

C

D

Solution

Adjustment entry is
Profit and Loss A/c dr.
To Provision for Discount on Debtors A/c

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Particulars	Dr. Rs.	Cr. Rs.
Furniture	$$20,000$$	-
Provision for depreciation	-	$$2,000$$
Addition to furniture on $$31-1-2015$$	$$6,000$$	-
Repair to furniture	$$1,000$$

Depreciation Provisions and Reserves Test - 42

Result

Depreciation Provisions and Reserves Test - 42

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Question 1

Rs. $$21,000$$

Rs. $$20,000$$

Rs $$15,000$$

Rs. $$14,000$$

Solution

Question 2

Rs. $$16,500$$

Rs. $$3,240$$

Rs. $$11,200$$

Rs. $$7,900$$

Question 3

Provision for depreciation account will be credited by Rs. $$3,200$$

Rs. $$5,600$$ will be debited to New Plant Account

Profit and Loss Account will be debited by Rs. $$200$$

All of the above

Question 4

Investment Fluctuation Reserve

Foreign Exchange Fluctuation Fund

General Reserve

Capital Reserve

Solution

Question 5

Rs. $$21,900$$

Rs. $$21,400$$

Rs. $$16,000$$

Rs. $$22,900$$

Question 6

Rs. $$1,25,000$$

Rs. $$1,35,000$$

Rs. $$1,05,000$$

Rs. $$1,50,000$$

Solution

Question 7

Rs. $$5,00,000$$

Rs. $$4,60,000$$

Rs. $$4,23,000$$

Rs. $$5,52,000$$

Question 8

Provision for doubtful debts represents the amount that cannot be collected

Cash balance on hand shows whether the business has earned Profit or Loss

Free samples received are business gains

The WDV of an assets depreciated on the reducing balance method can never become zero

Question 9

$$8$$%

$$9$$%

$$10$$%

None of the above

Question 10

A

B

C

D

Solution

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