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Depreciation Provisions and Reserves Test - 8

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Depreciation Provisions and Reserves Test - 8
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  • Question 1
    1 / -0

    What will be depreciation for the second year @10 % on Rs.15000 purchase price under the straight line method. 

    Solution

    Under straight line method the depreciation amount remains the same for all the years throughout the life of the asset. Hence depreciation = 15000*10/100 = 1500 

  • Question 2
    1 / -0

    What will be depreciation for the second year @10 % on Rs.15000 purchase price under the written down value method

    Solution

    Under written down value method depreciation is charged on the balance value of the asset at the end of the financial year.

    Year 1 Depreciation = 15000*10/100=1500

    Written down value = 15000-1500=13500

    Year 2 Depreciation = 13500*10/100= 1350 

  • Question 3
    1 / -0

    David ltd. Purchased a machine at a cost of Rs.900000 on 01.01.2008.It was decided to charge depreciation @ 10 % p.a on written down value method. Calculate the amount of depreciation to be charged in the second year.

    Solution

    Year one Depreciation = 9,00,000*10/100 = 90,000

    Value at the end of the year = 9,00,000-90,000 = 8,10,000

    Year two depreciation = 8,10,000* 10/100 = 81,000

  • Question 4
    1 / -0

    Neeraj and Co. purchased machinery for Rs.21000 in 01.01.2011.The estimated life of the machinery is 10 year after its residual value will be Rs.1000 only. Find the amount of annual depreciation according to Fixed Installment Method

    Solution

    Under fixed installment method depreciation remains the same year after year.

    Cost of machinery = 21000 

    Residual value = 1000

    Depreciation = (21000 - 1000)/10 = 2000

  • Question 5
    1 / -0

    A machine which cost Rs. 200000 is depreciated at 25 % per year using the written down value method. At the end second year the value of machine will be:

    Solution

    Value of the machine = 2,00,000

    Rate of depreciation is 25%

    1St year depreciation is = 2,00,000*25/100= 50000

    Value at the end of first year = 2,00,000 - 50000= 1,50,000

    Depreciation for 2nd year = 1,50,000 * 25/100 = 37,500

    Value at the end of second year = 1,50,000 - 37,500 = 1,12,500

  • Question 6
    1 / -0

    Rahul Ltd. purchased a Machinery on 1st May, 2009 for Rs.60000. On 1St July, 2010 it purchased another Machine for Rs.20000. On 31st March, 2011 it sold off the first machine purchased in 2009 for Rs.39000. Depreciation is provided at 20% on the original cost each year. Accounts are closed each year on 31st December. Calculate the Machinery account balance on 2011

    Solution

    1/5/2009                   Purchase                               60,000

    31/12/2009     Less: Depreciation                            8,000

    31/12/2009             Balance                                  52,000

    1/7/2010                 Purchase                                20,000

                                   Total                                        72,000

    31/12/2010             Depreciation

                                (12,000+2000)                           14,000

     31/12/2010            Balance                                   58,000

    31/3/2011           Less: Depreciation                         3,000

                              Less: Sale of machinery               39,000

                              Add : Profit on sale                         2000

    31/3/2011            Total                                            18,000

    31/12/2011         Less Depreciation                          4,000

     31/12/2011        Balance                                      14,000

  • Question 7
    1 / -0

    Rohan Ltd. purchased a Machinery on 1st May, 2009 for Rs.60000. On 1st July, 2010 it purchased another Machine for Rs.20000. On 31st March, 2011 it sold off the first machine purchased in 2009 for Rs.39000. Depreciation is provided at 20% on the original cost each year. Accounts are closed each year on 31st December. Calculate profit on machine

    Solution

                                      Machine 1

    1/5/2009                     Purchase                     60,000

    31/12/2009          Less: Depreciation                8,000

    31/12/2009                Balance                         52000

    31/12/2010           Less: Depreciation             12000

    31/12/2010                Balance                         40,000

    31/3/2011              Less: Depreciation               3,000

    31/3/2011                  Balance                         37,000

    31/3/2011              Sale of machinery             39,000

                                 Profit                                    2000

  • Question 8
    1 / -0

    Sakshi Ltd. purchased on 1st January, 2009 a machinery for Rs.36,000 and spent Rs.4,000 on its installation. On 1st July, 2009 another machine purchased for Rs.20,000. On 1st July, 2011, machine bought on 1st January, 2009 was sold for Rs.12,000 and a new machine purchased for Rs.64,000 on the same date. Depreciation is provided on 31st December @ 10% p.a. on the written down value method. Calculate balance of machinery A/c on 2011

    Solution

    1/1/2009                          Purchase                                       40,000

    1/7/2009                          Purchase                                       20,000

    31/12/2009                 Less: Depreciation

                                    ( 4000+1000)                                          5000

    31/12/2009                   Balance                                       55,000

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

    31/12/2010              Less: Depreciation                            5,500

    31/12/2010                   Balance                                     49,500

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

    1/7/2011                  Less: Depreciation                           1620

                                   Less: Sale of Machine 1                12,000

                                   Less: Loss on sale                         18780

     1/7/2011               Purchase of new machinery            64000

                                   Balance                                         81,100

    31/12/2011              Less : Depreciation                         4910

                                   Balance                                         76,190

  • Question 9
    1 / -0

    Sakshi Ltd. purchased on 1st January, 2009 a machinery for Rs.36000 and spent Rs.4000 on its installation. On 1 st July, 2009 another machine purchased for Rs.20000. On 1 st July, 2011, machine bought on 1 s January, 2009 was sold for Rs.12000 and a new machine purchased for Rs.64000 on the same date. Depreciation is provided on 31st December @ 10% p.a. on the written down value method. Calculate loss on sale of machine

    Solution

    Machine 1:

    1/1/2009                    Purchase                      40000

    31/12/2009               Less: Depreciation          4000

                                      Balance                         36000

    31/12/2010              Less: Depreciation             3600

                                     Balance                          32400

    1/7/2011                  Less: Depreciation             1620

                                    Balance                           30780

                                    Sale                                 12000

                                     Loss                                18780

  • Question 10
    1 / -0

    Shyam Ltd. purchased machinery on 1stMay, 2009 for Rs.60000. On 1st July, 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 balance of machine on 2011

    Solution

    1/5/2009                         Purchase                                60000

    31/12/2009            Less: Depreciation                            8000

                                    Balance                                         52000

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

    1/7/2010                Purchase                                         20000

                                  Total                                               72000

    31/12/2010            Depreciation                                   14000

                                   Balance                                         58000

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

    31/3/2011     Less:  Depreciation                                 3000

                                   Sale of machinery                       38500

                               Add: Profit on sale                            1500

                               Balance                                          18000

    31/12/2011          Less: Depreciation                           4000

                                Balance                                          14000

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