Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 53

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Weekly Quiz Competition

Question 1
1 / -0

S.Ltd. acquired a machine on 1st January 2010 at a cost of Rs 1,40,000 and spent Rs 10,000 on its installation. The firm writes off depreciation at 15% on WDV. The books are closed on 31st December every year. After 3 years machine sold for Rs 87,000. Profit Loss on sale =?

A
Profit - Rs$$1,023$$

B
Loss-$$1,023$$

C
Profit - Rs$$5,119$$

D
Loss - Rs$$5,119$$

Solution

Profit/loss = Sales value - WDV of machinery
= 87,000 - 92,119.
= RS-5,119

Working notes :-
Depreciation for 1st year(WDV method)
= (1,40,000 + 10,000) 1,50,000 x 15/100
= RS-22,500
Depreciation for 2nd year(WDV method)
= (1,50,000 - 22,500) 1,27,500 x 15/100
= RS-19,125.
Depreciation for 3rd year(WDV method)
= (1,27,500 - 19,125) 1.08,375 x 15/100
= RS-16,256.

WDV on 31st December 2013
= Cost of machinery - depreciation (For 3 years)
= 1,50,000 - (22,500 + 19,125 + 16,256)
= RS-92,119.
Question 2
1 / -0

Depreciation accounting is _______________.

A
A process of valuation of fixed asset

B
A process of allocation of the cost of fixed asset

C
A method of providing funds for replacement

D
A method of comparison

Solution

Depreciation is related to all fixed assets. it is apportioning the cost of the asset by writing it off over the life of the asset. It is also used to record the decline in the value of asset due to passage of time, wear and tear etc.
Question 3
1 / -0

Depreciation in subsequent years (other than the first year) is ___________.

A
a fall in the Original cost of an asset

B
a fall in the Book value of an asset

C
a fall in the market value of an asset

D
all of the above

Solution

Depreciation in subsequent years is a fall in the book value of an asset. Depreciation is related to all fixed assets.
it is apportioning the cost of the asset by writing it off over the life of the asset. It is also used to record the decline in the value of asset due to passage of time, wear and tear etc.
Question 4
1 / -0

A Company purchased plant for Rs. 50000. The useful life of the plant is 10 years and the residual value is Rs. 5000. The management wants to depreciate it by straight line method. What will be the rate of depreciation?

A
$$8\%$$

B
$$9\%$$

C
$$10\%$$

D
None of the above

Solution

As per question
Cost of Plant = Rs 50,000
Useful life = 10 years
Residual value = Rs 5000
Depreciation = Cost-Residual value/Estimated useful life
=50,000-5,000/10
=45000/10
=4500

Also,
rate of depreciation = Annual depreciation/cost of plant x 100
= 4500/50,000 x 100
= 9%
Question 5
1 / -0

The written down value of machine on 31st March 2013 is Rs 72,900. The machine was purchased on 1st April, 2010. Depreciation is charged @ 10 % p.a by diminishing balance method. The cost price of the machine = ?

A
Rs$$1,00,000$$

B
Rs$$90,000$$

C
Rs$$81,000$$

D
Rs$$72,000$$

Solution

WDV on 31st march 2013 = RS-72900 x 100/90
= RS-81,000
WDV on 31st march 2012 = RS-81,000 x 100/90
= RS-90,000.
Value on 1st April 2013 = RS-90,000 x 100/90
= RS-1,00,000.
Question 6
1 / -0

With reference to manufacturing account, which of the following is not true:

A
Depreciation on Factory Plants Machinery appears

B
Depreciation on Factory Land & Building appears

C
Depreciation on Office Land & Building appears

D
None of these

Solution

In manufacturing account all the expenses and income related to the manufacturing the goods is recorded. Depreciation on machinery, factory land will appear in the manufacturing account but Depreciation on office land and building will be shown in the profit and loss account and not in manufacturing account.
Question 7
1 / -0

Which of the following statement is/are NOT correct?

A
Provision for bad debts appears as a liability on the balance sheet

B
The provision for bad debts is owed to the proprietor

C
Bad debts could be less than the provision for bad debts

D
Bad debts could exceed the provision for bad debts
Question 8
1 / -0

Depreciation is related to:

A
Current Assets

B
Investment

C
All Fixed Assets

D
All Fixed Tangible Assets

Solution

Depreciation is related to all fixed assets. it is apportioning the cost of the asset by writing it off over the life of the asset.
It is also used to record the decline in the value of asset due to passage of time, wear and tear etc.
Question 9
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$$12,545$$

Solution

Purchase Price of Machine on 1.01.2012 = Rs 25,000
Rate of Depreciation = 30% p.a

Calculation of depreciation as at 31st December 2013

Original cost as on 1.01.2012 = Rs 25,000
Less: Depreciation at the end
as on 31.3.2012
(25,000 X 30% X 3/12) = Rs (1875)

Book Value as on 1.01.2012 = Rs 23125

Less: Depreciation at the end
On 31.3.2013                          = Rs (6937)

Book Value on 31.12.2013      = Rs 16187.5

Less: Depreciation till
31.12.2013                              = Rs (3642.18)

Book Value as at 31.12.2013 = Rs 12545.3.
Question 10
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$$5,52,000$$

Solution

Depreciated value after 3 years = Rs 3,89,34
Rate of depreciation 8%

Calculation of purchase price:
Purchase price = Rs 3,89,344/(1-0.08)³x 100

^{=5,00,000(Rounded off).}

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Depreciation Provisions and Reserves Test - 53

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Depreciation Provisions and Reserves Test - 53

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Question 1

Profit - Rs$$1,023$$

Loss-$$1,023$$

Profit - Rs$$5,119$$

Loss - Rs$$5,119$$

Solution

Question 2

A process of valuation of fixed asset

A process of allocation of the cost of fixed asset

A method of providing funds for replacement

A method of comparison

Solution

Question 3

a fall in the Original cost of an asset

a fall in the Book value of an asset

a fall in the market value of an asset

all of the above

Solution

Question 4

$$8\%$$

$$9\%$$

$$10\%$$

None of the above

Solution

Question 5

Rs$$1,00,000$$

Rs$$90,000$$

Rs$$81,000$$

Rs$$72,000$$

Solution

Question 6

Depreciation on Factory Plants Machinery appears

Depreciation on Factory Land & Building appears

Depreciation on Office Land & Building appears

None of these

Solution

Question 7

Provision for bad debts appears as a liability on the balance sheet

The provision for bad debts is owed to the proprietor

Bad debts could be less than the provision for bad debts

Bad debts could exceed the provision for bad debts

Question 8

Current Assets

Investment

All Fixed Assets

All Fixed Tangible Assets

Solution

Question 9

Rs$$12,250$$

Rs$$10,000$$

Rs$$17,750$$

Rs$$12,545$$

Solution

Question 10

Rs$$5,00,000$$

Rs$$4,60,000$$

Rs$$4,23,000$$

Rs$$5,52,000$$

Solution

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