Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 43

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Weekly Quiz Competition

Question 1
1 / -0

Equipment was purchased on 1st January 2012 for Rs. $$25,000$$ and is to be depreciated at $$30$$% based on reducing balance method. If the company closes its books of account on 31st March every year, what would be the net book value of the equipment as at 31st December, 2013?

A
Rs. $$12,250$$

B
Rs. $$10,000$$

C
Rs. $$17,750$$

D
Rs. $$12,545$$
Question 2
1 / -0

A boiler was purchased by a company for Rs.20 lakhs. After 2 years its cost came down to Rs.10 lakhs. The salvage value of the boiler is Rs.2 lakhs. On which cost the depreciation for the asset will be calculated in Straight Line method?

A
It will be calculated on the basis of its original cost of Rs.20 lakhs.

B
It will be calculated on the basis of Rs.18 lakhs.

C
It will be calculated on the basis of Rs.10 lakhs.

D
It will be calculated by taking the average of all three costs.

Solution

Straight line basis is a method of calculating depreciation and amortization. It is calculated by dividing the difference between an asset's cost and its expected salvage value by the number of years it is expected to be used. Hence, option (b) is correct.
Question 3
1 / -0

An additional purchase was made for machine on 15.06.2009. Under straight line method ________.

A
depreciation will be changed from the date of purchase

B
depreciation will be charged from the beginning of the year

C
Both a & b

D
None of the above
Question 4
1 / -0

For an asset owned for more than one year, the depreciation charge for the year calculated using the reducing-balance basis at the rate of 35% would be arrived at as follows:

A
35% x cost of the asset

B
35% x (cost of the asset - accumulated depreciation)

C
35% x accumulated depreciation

D
35% x (cost of the asset + accumulated depreciation)
Question 5
1 / -0

If an accumulated provision for depreciation account is in use then the entries for the year's depreciation would be ________.

A
debit Asset Account, credit Profit and Loss Account

B
credit Profit and Loss Account, debit Provision for Depreciation Account

C
credit Asset Account, debit Provision for Depreciation Account

D
credit Provision for Depreciation Account, debit Depreciation Account

Solution

Journal entry for charging depreciation when accumulated depreciation account is opened:
Depreciation A/c Dr. XXX
To Provision for depreciation A/c XXX
( Being depreciation charged)
Therefore, D is the correct option.
Question 6
1 / -0

An additional purchase of Rs.2,00,000 was made for a machine on 01.12.2006. Under straight-line method, depreciation at the rate of 10% ________.

A
will be charged for half of the year

B
will be charged from the beginning of the year

C
Both a & b

D
None of the above
Question 7
1 / -0

Which of the following is NOT a feature of depreciation?

A
Permanent

B
Continuous

C
Gradual

D
Temporary

Solution

Depreciation can be defined as a continuing, permanent and gradual decrease in the book value of fixed assets. This type of shrinkage is based on the cost of assets utilised in a firm and not on its market value.
Therefore, D is the correct option,
Question 8
1 / -0

In the Straight-line method of providing depreciation, depreciation _______.

A
increase every year

B
remain constant every year

C
decreases every year

D
None of them

Solution

Under straight line method of depreciation, the amount of depreciation remains constant because depreciation is provided at a fixed rate on the purchase price of the asset.
Question 9
1 / -0

Invariably in diminishing balance method ________.

A
Book value becomes zero

B
Book value never becomes zero

C
Book value is negative

D
Book value is infinite
Question 10
1 / -0

In diminishing balance method ________.

A
amount of depreciation value keeps on decreasing over the passage of time

B
amount of depreciation value remains same over the passage of time

C
calculation of rate of depreciation is early

D
depreciation is charged on the original cost of asset

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 43

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Depreciation Provisions and Reserves Test - 43

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Question 1

Rs. $$12,250$$

Rs. $$10,000$$

Rs. $$17,750$$

Rs. $$12,545$$

Question 2

It will be calculated on the basis of its original cost of Rs.20 lakhs.

It will be calculated on the basis of Rs.18 lakhs.

It will be calculated on the basis of Rs.10 lakhs.

It will be calculated by taking the average of all three costs.

Solution

Question 3

depreciation will be changed from the date of purchase

depreciation will be charged from the beginning of the year

Both a & b

None of the above

Question 4

35% x cost of the asset

35% x (cost of the asset - accumulated depreciation)

35% x accumulated depreciation

35% x (cost of the asset + accumulated depreciation)

Question 5

debit Asset Account, credit Profit and Loss Account

credit Profit and Loss Account, debit Provision for Depreciation Account

credit Asset Account, debit Provision for Depreciation Account

credit Provision for Depreciation Account, debit Depreciation Account

Solution

Question 6

will be charged for half of the year

will be charged from the beginning of the year

Both a & b

None of the above

Question 7

Permanent

Continuous

Gradual

Temporary

Solution

Question 8

increase every year

remain constant every year

decreases every year

None of them

Solution

Question 9

Book value becomes zero

Book value never becomes zero

Book value is negative

Book value is infinite

Question 10

amount of depreciation value keeps on decreasing over the passage of time

amount of depreciation value remains same over the passage of time

calculation of rate of depreciation is early

depreciation is charged on the original cost of asset

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