Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 52

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Question 1
1 / -0

A change in accounting policy e.g. change in method of depreciation is justified -

A
To comply with accounting standard

B
To ensure more appropriate presentation of the financial statement of the enterprise

C
To comply with law

D
All of the above

Solution

Accounting policies are accounting principles and must be applied consistently.
However due to the given reasons changes must be made in the accounting policies to promote a better comparability, enhance reliability and understanding of the financial statements of the entity.
Question 2
1 / -0

A machine was purchased on 1st January 2013 for Rs 25,000 and is to be depreciated at 30 % p.a. based on reducing balance method. If the company closes books of account on 31st March every year, what would be the net book value of the equipment as at 31st December, 2014?

A
Rs.$$12,250$$

B
Rs.$$10,000$$

C
Rs.$$17,750$$

D
Rs.$$12,545$$

Solution

Purchase Price of Machine on 1.01.2013 = Rs 25,000

Rate of Depreciation = 30% p.a

Calculation of depreciation as at 31st December 2014

Original cost as on 1.01.2013 = Rs 25,000

Less: Depreciation at the end

as on 31.3.2013

(25,000 X 30% X 3/12)            = Rs (1875)

Book Value as on 1.01.2013 = Rs 23125

Less: Depreciation at the end

On 31.3.2014                          = Rs (6937)

Book Value on 31.12.2014      = Rs 16187.5

Less: Depreciation till

31.12.2014                              = Rs (3642.18)

Book Value as at 31.12.2014   = Rs 12545.3
Question 3
1 / -0

Hi-Fi Ltd acquired machinery on 1st January 2012 at a cost of Rs36,000 and spent Rs.4,000 for its installation. The firm writes off depreciation at 10% p.a. on WDV basis. The books are closed on 31st December. Depreciation for 1st& 2nd year will be Rs________ & Rs_______.

A
$$3,600, 3,240$$

B
$$4,000, 3,600$$

C
$$3,600, 4,000$$

D
$$3,240, 2,916$$

Solution

Total cost of machinery = 36,000 + 4,000
= RS. 40,000.
Depreciation for 1st year :- (WDV method)
= 40,000 x 10/100
= RS-4,000.
Depreciation for 2nd year :- (WDV method)
= (40,000 - 4,000) 36,000 x 10/100
= RS-3,600.
Question 4
1 / -0

On 1.8.2012 K Ltd. bought four Matador Vans costing Rs 1,20,000 each.
The company expected to fetch a scrap value of 25% of the cost price of the vehicles after 10 years. The vehicles were depreciated under the fixed installment method up to 31.3.2015. The rate of depreciation charged up to 31.3.2015 = ?

A
$$10.0\%$$

B
$$9.0\%$$

C
$$8.5\%$$

D
$$7.5\%$$

Solution

Rate of depreciation = depreciation
---------------------- x 100
value of asset
   = 9,000(WN)
   ------------------    x 100
   1,20,000
= 7.5 %
Working note:-
1) Depreciation on SLM basis = value of asset - scrap value
   ----------------------------------------
useful life
   = 1,20,000 - 30,000(25% of 1,20,000)
   -----------------------------------------------------
   10 years
   = RS-9,000.
Question 5
1 / -0

Original Cost = Rs$$1,00,000$$. Life = $$5$$ years. Expected salvage value = Rs$$2,000$$. What will be the rate of depreciation p.a?

A
$$20.0\%$$

B
$$19.8\%$$

C
$$19.6\%$$

D
$$19.4\%$$

Solution

Depreciation = $$\frac{1,00,000 - 2,000}{5} = 19,600$$;
Rate of depreciation = $$\frac{19,600 \times 100}{1,00,000} = 19.6\%$$
Question 6
1 / -0

On $$1.1.2014$$, the Plant Account showed a balance of Rs.$$80,000$$. Out of the above, a Plant whose book value was Rs$$10,000$$ on that date, was sold for Rs$$6,000$$ on $$1.4.2015$$. On $$1.10.2015$$, the plant was purchases for Rs$$20,000$$. Depreciation is charged at $$10\%$$ p.a. on SLM basis and books of accounts are closed on $$31st$$ December each year. Balance of Plant on $$31.3.2015$$=?

A
Rs.$$72,000$$

B
Rs.$$92,000$$

C
Rs.$$75,500$$

D
Rs.$$83,000$$
Question 7
1 / -0

A Ltd.acquired a machine on $$1st$$ January, $$2010$$ at a cost of Rs$$14,000$$ and spent Rs$$1,000$$ on its installation. The firm writes off depreciation at $$10\%$$ p.a of the original cost every year. The books are closed on $$31st$$ December every year. The books are closed on $$31st$$ December every year. After $$3$$ years machine sold for Rs$$9,000$$. Profit/Loss on sale = ?

A
Profit-Rs$$1,500$$

B
Loss - Rs$$1,500$$

C
Profit - Rs$$800$$

D
Loss - Rs$$800$$
Question 8
1 / -0

N.Ltd, purchased machine for Rs 1,00,000 on 1.1.2012. Installation expenses were Rs 10,000. Life of the asset is 5 years at the end of which asset can be sold at Rs 5,000. Depreciation rate is 15% on WDV. Depreciation for 4th year = Rs______?______.

A
$$9,212$$

B
$$9,673$$

C
$$10,594$$

D
$$10,133$$

Solution

Depreciation for 4th year :-
= 67553.75 x 15/100
= 10,133.

Working notes :-
1) Value of machinery = 1,00,000 + 10,000
= 1,10,000.
1st year depreciation :-
= 1,10,000 x 15/100
= 16,500.
2nd year depreciation :-
= (1,10,000 - 16,500) 93,500 x 15/100
= 14,025
3rd year depreciation :-
= (93500 - 14,025) 79,475 x 15/100
= 11,921.25.

2) WDV of machinery at the beginning of 4th year =
= 1,10,000 - 16,500 - 14,025 - 11,921,25
= 67,553.75.
Question 9
1 / -0

Consider the following information:
Rate of depreciation under the written down method = $$20\%$$; Original cost of the asset = Rs$$1,00,000$$; Residual value of the asset at the end of useful life = Rs.$$40,960$$.
Estimated useful life of the asset = ?

A
$$4$$ years

B
$$5$$ years

C
$$6$$ years

D
$$7$$ year
Question 10
1 / -0

On $$1st$$ April $$2015$$ in Sethi's Ledger, furniture account showed a balance of Rs$$2,00,000$$. On $$1st$$ October, $$2015$$ Sethi purchased new furniture by paying Rs$$5,000$$ and giving old furniture whose book value on $$1st$$ April $$2015$$ was Rs $$12,000$$ to the seller. Sethi provides depreciation on furniture @ $$10\%$$ p.a on diminishing balance method. The net book value of furniture in Seti's book on $$31.3.2016$$=?

A
Rs.$$1,85,080$$

B
Rs.$$1,83,960$$

C
Rs.$$1,84,780$$

D
Rs.$$2,04,400$$

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Depreciation Provisions and Reserves Test - 52

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Depreciation Provisions and Reserves Test - 52

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SHARING IS CARING

Question 1

To comply with accounting standard

To ensure more appropriate presentation of the financial statement of the enterprise

To comply with law

All of the above

Solution

Question 2

Rs.$$12,250$$

Rs.$$10,000$$

Rs.$$17,750$$

Rs.$$12,545$$

Solution

Question 3

$$3,600, 3,240$$

$$4,000, 3,600$$

$$3,600, 4,000$$

$$3,240, 2,916$$

Solution

Question 4

$$10.0\%$$

$$9.0\%$$

$$8.5\%$$

$$7.5\%$$

Solution

Question 5

$$20.0\%$$

$$19.8\%$$

$$19.6\%$$

$$19.4\%$$

Solution

Question 6

Rs.$$72,000$$

Rs.$$92,000$$

Rs.$$75,500$$

Rs.$$83,000$$

Question 7

Profit-Rs$$1,500$$

Loss - Rs$$1,500$$

Profit - Rs$$800$$

Loss - Rs$$800$$

Question 8

$$9,212$$

$$9,673$$

$$10,594$$

$$10,133$$

Solution

Question 9

$$4$$ years

$$5$$ years

$$6$$ years

$$7$$ year

Question 10

Rs.$$1,85,080$$

Rs.$$1,83,960$$

Rs.$$1,84,780$$

Rs.$$2,04,400$$

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