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Depreciation Provisions and Reserves Test - 7

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Depreciation Provisions and Reserves Test - 7
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  • Question 1
    1 / -0

    A car was purchased for Rs.5500. Its residual value was estimated to be Rs.500 while its monthly depreciation expenses are Rs.100 using straight line method. Which of the following is the annual rate of depreciation?

    Solution

    Amount of depreciation per month = 100....so annual depreciation = 1200. Rate of depreciation = ( 1200/5000)= 0.24 

  • Question 2
    1 / -0

    A fixed asset having book value of Rs.2000 was sold for Rs.1500. Find out gain or loss.

    Solution

    Book value is the value of the asset after depreciation. So the sale value is compared with the book value to find out the profit or loss. 

    2000-1500=500 loss on sale of asset.

  • Question 3
    1 / -0

     A business bought a plant at a cost of Rs.20000, with an estimated life of 5 years and an estimated residual value of Rs. 2000, the annual depreciation on this asset will be

    Solution

    Cost of the asset = 20000. Residual value = 2000. Annual depreciation value = (20000-2000)/ 5 = 3600

  • Question 4
    1 / -0

    An asset was bought for Rs.40000 on 1-1-1988. It was decided to charge the depreciation on this asset @ 10% under reducing balance method. The depreciation on this asset for the year ended 31/12/90 will be:

    Solution

    Under writted down value method : 

    Cost as on 1/1/1988 =               40000            Value as on 1/1/89                 = 36000           Value as on 1/1/90             = 32400

    Less: Depreciation for 1988 =      4000           Less: Depreciation for 1989   =    3600          Less: Depreciation for 1990=   3240

    Value as on 31/12/88 =              36000           Value as on 31/12/1989          = 32400           Value as on 31/12/1990      = 29160

  • Question 5
    1 / -0

    Shyam Ltd. purchased machinery on 1stMay, 2009 for Rs.60000. On 1stJuly, 2010 it purchased another machine for Rs. 20000. On 31st March, 2011, it sold the first machine purchased in 2009 for Rs. 38500. Depreciation provided @ 20% p.a. on the original cost every year. Accounts are closed 31st December every year. Calculate profit on machine

    Solution

    Cost as on 1/5/2009                   = 60000          Value as on 1/1/2010                  = 52000       Value as on 1/1/2011                     = 40000   Value as on 31/3/2011 = 37000

    Less depreciation for 2009                                 Less Depreciation for 2010           12000        Less Depreciation till 31/3/2011    =   3000    Selling price               = 38500

    ( 60000*20/100*8/12)                 =   8000           (60000*20/100)                                                (60000*20/100*3/12)                                      Profit                          = 1500

    Value as on 31/12/2009             = 52000            Value as on 31/12/2010              = 40000        Value as on 31/3/2011                 = 37000

     

  • Question 6
    1 / -0

    The original cost of the asset is Rs.250000.The useful life of the asset is 10 years and net residual value is estimated to be Rs.50000. Now, the amount of depreciation to be charged every year will be

    Solution

    Cost of the machine = 250000           

    Residual value = 50000

    Life of the machine 10 years

    Depreciation to be charged = (250000-50000)/10 = 20000

  • Question 7
    1 / -0

    M/s Singh purchased a plant for Rs. 500000 on April, 01 2002, and spent Rs.50000 for its installation. The salvage value of the plant after its useful life of 10 years is estimated to be Rs.10000.Calculate amount of depreciation as depreciation is charged using straight line method

    Solution

    Total cost of the asset = 500000+50000= 550000

    Residual value = 10000

    Value of depreciation =( 550000-10000)/10 = 54000

  • Question 8
    1 / -0

    M/s Mohit and Sons acquired a machine for Rs.180000 on October 01, 2012, and spent Rs.20000 for its installation. The firm writes-off depreciation at the rate of 10% on original cost every year. Record necessary journal entries for the year 2012 for the expenses incurred on installation.

    Solution

    The expenses incurred on installation of machinery is treated as a capital expenditure and is charged to the machinery a/c. The expenses incurred till the machinery is put to use is charged to the machinery account.

  • Question 9
    1 / -0

    A machine purchased for Rs.1,00,000 on November 01, 2004, having accumulated depreciation amounting to Rs.60,000 was sold on April 1, 2009 for Rs.35,000. The Asset Disposal account will be prepared. Calculate the amount of loss on sale

    Solution

    Cost of the machine = 1,00,000

    Accumulated depreciation on the machine = 60,000

    Written down value as on 1st April 2009 = 1,00,000- 60,000= 40,000

    Sale value = 35,000

    Loss on sale of machinery = 40,000- 35,000= 5000

  • Question 10
    1 / -0

    Original cost of a machinery is Rs.500000, salvage value is Rs.20000. Expected useful life is 10 years. What will be the amount of depreciation for the fourth year according to original cost method

    Solution

    Original cost method means straight line method where depreciation remains the same throughout the life of the asset. 

    Cost = 500000  Life =10 years   Salvage value = 20000

    Depreciation = (500000- 20000)/10 = 48000.

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