Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 66

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Question 1
1 / -0

Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from -
I. Use
II. Effluxion of time
III. Obsolescence through technology and market changes
Select the correct answer from the options given below

A
I and II.

B
II and III.

C
I and III.

D
Any of the above.

Solution

As per Accounting Standard-6, Depreciation is a measure of the wearing out,consumption or other loss of value of a appreciable asset arising from use, effluxion of time or obsolescence through technology and market changes. Depreciation is a non-cash flow expense for an entity.
Therefore, The correct option is D.
Question 2
1 / -0

Sinking funds is created for___________.

A
redemption of long term liabilities

B
replacement of depreciable assets

C
both (A & B)

D
none of the above

Solution

Option C is the correct One.
there are two main purposes of creating Sinking fund
1. Repayable of long term debt
2.Certain amount keep aside for the payment of regular expenses for the specific purpose.
Question 3
1 / -0

Which of these is known as accelerated method of depreciation?

A
double declining method

B
sum of years digit method

C
written down method

D
all the three
Question 4
1 / -0

Which of these is not an accepted method of depreciation

A
Straight line method

B
Sinking fund method

C
Written down method

D
Market value

Solution

there are generally four methods of depreciation:-
1. Straight Line method
2. Double-Declining balance method
3. Written down value method
4. Sinking Fund method.
Therefore Market value is not an accepted method of depreciation.
Question 5
1 / -0

Providing depreciation on fixed assets over its useful life is an application of __

A
Money measurement

B
Matching concept

C
Cost concept

D
Entity concept

Solution

The Matching Concept states that all the expenses of a particular year should be matched with all respective revenue. As an asset is used during the year, therefore, its value is reduced in the form of depreciation. Such reduction in the value of fixed assets is recorded in the book of accounts by debiting depreciation.
Due to Matching Concept, all the adjustment entries are made in the books of accounts..
Question 6
1 / -0

On 1.1.06 Novel Industries pin-chased new office equipment for Rs. 150,000 with a working life of 10 years. The estimated scrap value at the end of 10 years is estimated to be Rs. 20,000. Find the depreciation for the 10th year under Straight-Line Method.

A
15,000

B
13,000

C
12,000

D
10,000

Solution
Question 7
1 / -0

Accumulated Depreciation account has a _____________.

A
Credit Balance only

B
Debit Balance only

C
Credit or Debit balance

D
All of the above

Solution

Accumulated depreciation is a contra asset. Since assets have a normal debit balance, this would make accumulated depreciation have a normal credit balance. This account should be a credit balance as it is a contra-asset account.
Question 8
1 / -0

A company purchased a new machine for Rs$$\,5,00,000$$ and machine's test run was started to make sure that machine works properly. There was expense of Rs $$5,000$$ incurred on test run, however the sale proceeds of test production were Rs $$2,000$$. You are required to find out the total cost of machine?

A
$$5,00,000$$

B
$$5,05,000$$

C
$$5,03,000$$

D
$$4,95,000$$

Solution

Calculation of Cost of Machine
Purchase price of Machine 500,000
Add: Expenses on test run 5000
Less: Revenue from Test run 2000
Total Cost 503,000
Question 9
1 / -0

A purchased an old computer costing Rs. $$10,000$$ and incurred Rs. $$1,000$$ on its repair and Rs. $$500$$ on its packing. He sold the computer at $$20\%$$ margin on selling price. The sales value will be _________________.

A
Rs. $$12,500$$

B
Rs. $$11,000$$

C
Rs. $$14,375$$

D
Rs. $$13,800$$

Solution

Gross Margin is 20% on Selling Price
If Selling Price is 100
Than cost will be 80% of the selling price
that means Margin on cost becomes 20/80 i.e. 25% on cost

Computer Costing Rs.10000
Repairs Rs. 1000
Packing Rs. 500
-------------
Total Cost Rs.11500
Margin @25% Rs. 2875
-------------
Selling Price Rs.14375
--------------
Question 10
1 / -0

Q.Ltd acquired machinery on $$1$$st January $$2011$$ at a cost of Rs$$72,000$$ and spent Rs$$8,000$$ for its installation. The firm writes off depreciation at $$10\%$$ p.a on the original cost every year. The books are closed on $$31$$st December every year. Closing balance of machinery for $$1$$st & $$2$$nd year as per fixed instalment method will be Rs............

A
$$72,000, 64,000$$

B
$$74,000, 66,600$$

C
$$74,000, 72,000$$

D
$$74,000, 66,000$$

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Depreciation Provisions and Reserves Test - 66

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Depreciation Provisions and Reserves Test - 66

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SHARING IS CARING

Question 1

I and II.

II and III.

I and III.

Any of the above.

Solution

Question 2

redemption of long term liabilities

replacement of depreciable assets

both (A & B)

none of the above

Solution

Question 3

double declining method

sum of years digit method

written down method

all the three

Question 4

Straight line method

Sinking fund method

Written down method

Market value

Solution

Question 5

Money measurement

Matching concept

Cost concept

Entity concept

Solution

Question 6

15,000

13,000

12,000

10,000

Solution

Question 7

Credit Balance only

Debit Balance only

Credit or Debit balance

All of the above

Solution

Question 8

$$5,00,000$$

$$5,05,000$$

$$5,03,000$$

$$4,95,000$$

Solution

Question 9

Rs. $$12,500$$

Rs. $$11,000$$

Rs. $$14,375$$

Rs. $$13,800$$

Solution

Question 10

$$72,000, 64,000$$

$$74,000, 66,600$$

$$74,000, 72,000$$

$$74,000, 66,000$$

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