Depreciation Provisions and Reserves Test

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Depreciation Provisions and Reserves Test - 67

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Question 1

1 / -0

Directions For Questions

In the year 2014-2015 C Ltd. purchase a new machine and made the following payments in relation to it:

Particulars	Rs
Cost as per supplier's list	$$5,20,000$$
Agreed discount	$$50,000$$
Delivery charges	$$10,000$$
Erection charges	$$20,000$$
Annual maintenance charges	$$30,000$$
Additional components to increase capacity of machine	$$40,000$$
Annual insurance premium	$$5,000$$

...view full instructions

The cost of the machine is _______

Rs. $$5,40,000$$

Rs. $$5,45,000$$

Rs. $$4,70,000$$

Rs. $$5,50,000$$

Solution

The calculation of the cost of new Machine is

Cost as per supplier's list 520,000
Less: Agreed discount (50,000)
Add: Delivery charges 10,000
Add: Erection charges 20,000
Add: Addi. Component 40,000
540,000
Only Capital expenses are added to the cost of the asset and revenue expenses are not added.

Question 2
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Depreciable value of an asset is equal to _________.

A
Cost + Scrap value

B
Cost + Market price

C
Cost - Scrap value

D
None of them

Solution

The depreciable cost is the cost of an asset that can be depreciated over time. It is equal to the acquisition cost of the asset minus its estimated salvage value at the end of its useful life.
Hence, the correct option is C.
Question 3
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A firm owns a fleet of vehicles acquired at a total cost of Rs$$4,80,000$$. Accumulated depreciation up to the beginning of the current year is Rs$$2,12,400$$. Vehicles are depreciated at $$25\%$$ p.a using the reducing balance method. The written down value of the vehicles by the end of the current year would be:-

A
$$Rs.2,67,600$$

B
$$Rs.66,900$$

C
$$Rs.1,47,600$$

D
$$Rs.2,00,700$$
Question 4
1 / -0

The book value of an asset is defined as ___________.

A
cost minus salvage value

B
cost minus accumulated depreciation

C
cost minus salvage value minus accumulated depreciation

D
estimated fair market value

Solution

Book value of an asset is 'carrying' value of an asset in the balance sheet which is calculated after deducting accumulated depreciation, amortization and impairment on asset.
Salvage Value is considered for determining an estimated amount of depreciation and not the book value of the asset directly.
Fair Value of an asset is an estimated amount any buyer is willing to pay for the asset in the market (unrelated party).
Question 5
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 $$15$$% p.a on WDV. The books are closed on 31st December every year. After 3 years machine sold for Rs. $$97,000$$. Profit/Loss on sale = ?

A
Profit - Rs. $$4,881$$

B
Loss - Rs. $$4,881$$

C
Profit - Rs. $$11,023$$

D
Loss - Rs. $$11,023$$

Solution

Profit/loss = Sales value - WDV of machinery

= 97,000 - 92,119.

= Rs. 4881

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 6
1 / -0

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as _______.

A
Appreciation

B
Depreciation

C
Fluctuation

D
None of these

Solution

The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset.
Hence, the correct option is B.
Question 7
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K & Co. acquired machinery on $$1$$st July $$2011$$ at a cost of Rs$$45,000$$ and spent Rs$$5,000$$ for its installation. The firm writes off depreciation at $$10\%$$ p.a on the original cost every year. The books are closed on $$31st$$ March every year. Depreciation for the year ended $$31st$$ March $$2012$$ & $$31$$st March $$2013$$ will be Rs....... & Rs ..............

A
$$3,750 & 5,000$$

B
$$5,000 & 3,750$$

C
$$3,750 & 3,750$$

D
$$5,000 & 5,000$$
Question 8
1 / -0

A firm acquired machinery on 1st July 2019 at a cost of Rs 45,000 and spent Rs 5,000 for its installation. The firm writes off depreciation at 10% per annum on the diminishing balance method. The books are closed on 31 st March every year. Depreciation for the year ended 31st March 2020 & 31st March 2021 will be Rs_______& Rs________.

A
$$3,750, 5,000$$

B
$$4625, 3,750$$

C
$$3,750, 4,625$$

D
$$5000, 3,750$$

Solution

Depreciation at the end of the year:-
31st March 2012
(value of machinery will be cost of the machinery plus installation charges - 45,000 + 5,000)
= 50,000 x 10/100 x 9/12 (1st July 2011 to 31st march)
= 3,750.

31st March 2013 (depreciation for the full year)
= (50,000 - 3750) 46250 x 10/100
= 4,625.
Question 9
1 / -0

Original Cost = Rs. 1,00,000. Life = 5 years. Expected salvage value = Rs. 2,000
Rate of depreciation p.a.as per straight line method is _______.

A
20.0%

B
19.8%

C
19.6%

D
19.4%

Solution

Depreciation in SLM = cost of assets+Installation charges-scrap value/estimated useful life
=100000-2000/5
=98000/5
Annual depreciation=19600
Rate of depreciation = Annual depreciation *100/cost of assets
=19600*100/100000
=19.6%

Question 10

1 / -0

On the basis of the information given below answer the following question.
In the year 2014-15 C Ltd. purchased a new machine and made the following payments in relation to it:-

Particulars	Rs
Cost as per supplier's list Agreed discount Delivery charged Erection charges Annual maintenance charges Additional maintenance charges Additional component to increase capacity of machine Annual insurance premium	5,20,000 50,000 10,000 20,000 30,000 40,000 5,000

If depreciation is provided @ 10 % p.a, SLM depreciation for 3rd year will be:-

Rs$$54,000$$

Rs$$54,5000$$

$$47,000$$

$$55,000$$

Solution

Calculation of cost of the machinery:-

Cost as per supplier = 5,20,000

Add:- delivery charges = 10,000

erection charges = 20,000

Additional component to increase capacity of machine = 40,000

-------------------

= 5,90,000

Less:- Agreed discount = (50,000)

----------------------

Cost of the machinery :- = 5,40,000

Depreciation on machinery (SLM Basis) = Cost of machinery x rate

= 5,40,000 x 10/100

= 54,000.

Note:- All the cost that are incurred to bring the machinery in the running condition when purchased will be added to the cost of the machinery. Costs like annual maintenance charges, insurance charges, additional maintenance charges etc will not be included in the cost of the machinery.

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Re-Attempt Weekly Quiz Competition

Depreciation Provisions and Reserves Test - 67

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Depreciation Provisions and Reserves Test - 67

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SHARING IS CARING

Question 1

Rs. $$5,40,000$$

Rs. $$5,45,000$$

Rs. $$4,70,000$$

Rs. $$5,50,000$$

Solution

Question 2

Cost + Scrap value

Cost + Market price

Cost - Scrap value

None of them

Solution

Question 3

$$Rs.2,67,600$$

$$Rs.66,900$$

$$Rs.1,47,600$$

$$Rs.2,00,700$$

Question 4

cost minus salvage value

cost minus accumulated depreciation

cost minus salvage value minus accumulated depreciation

estimated fair market value

Solution

Question 5

Profit - Rs. $$4,881$$

Loss - Rs. $$4,881$$

Profit - Rs. $$11,023$$

Loss - Rs. $$11,023$$

Solution

Question 6

Appreciation

Depreciation

Fluctuation

None of these

Solution

Question 7

$$3,750 & 5,000$$

$$5,000 & 3,750$$

$$3,750 & 3,750$$

$$5,000 & 5,000$$

Question 8

$$3,750, 5,000$$

$$4625, 3,750$$

$$3,750, 4,625$$

$$5000, 3,750$$

Solution

Question 9

20.0%

19.8%

19.6%

19.4%

Solution

Question 10

Rs$$54,000$$

Rs$$54,5000$$

$$47,000$$

$$55,000$$

Solution

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