Basics of Financial Mathematics Test 28

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Basics of Financial Mathematics Test 28

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Weekly Quiz Competition

Question 1
1 / -0

According to Accounting Standard-6 which of the following is not required to be disclosed in the financial statement?

A
Historical cost of the asset

B
Depreciated value of the asset

C
Accumulated depreciation

D
Total depreciation for the period for each class of asset

Solution

AS-6 deals with depreciation of the tangible asset. Hence, only the historical cost, accumulated depreciation on the asset and total depreciation for the period for each class of asset will be recorded. Depreciable value of asset is not to be disclosed according to AS-6.
Question 2
1 / -0

Which of the following assets is usually assumed not to depreciate?

A
Land

B
Building

C
Plant

D
Furniture

Solution

The land is usually assumed not to depreciate because the land is assumed to have an unlimited useful life.
Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the cost of those assets must be allocated to those limited accounting periods. Since land's life is not limited, there is no need to allocate the cost of land to any accounting period.
Question 3
1 / -0

The permanent, continuing and gradual shrinkage in the book value of a fixed assets is called _______.

A
Appreciation

B
Depreciation

C
Reduction

D
Computation

Solution

The monetary value of an asset decrease over time due to use, wear and tear or obsolescence. This decrease is measured as depreciation.
Question 4
1 / -0

The reduction in the value of the fixed assets which can arise due to time factor is:

A
Discount

B
Depreciation

C
Reduction

D
None of these

Solution

Fixed assets are those assets that have a long useful life. These assets get deteriorated due to their usage along with passes of time and looses their value too. This reduction in the value of assets due to usage and time is called depreciation.
Depreciation has to be charged to the profit & loss account as an expense and the value of the assets to be reduced while showing in the balance sheet.
Question 5
1 / -0

According to Accounting Standard-6, depreciation is to be provided on the basis of _____________.

A
Historical cost of the asset

B
Market price of the asset

C
Replacement cost of asset

D
Any of the above

Solution

According to Accounting standard-6, depreciation is to be provided on the basis of the historical cost of the asset.
The historical cost of a depreciable asset represents its money outlay, or it's equivalent in connection with its acquisition, installation and commissioning as well as for additions to or improvement thereof.
The historical cost of a depreciable asset may undergo subsequent changes arising as a result of an increase or decrease in long term liability on account of exchange fluctuations, price adjustments, changes in duties or similar factors.
Question 6
1 / -0

Accounting Standard-6 relating to depreciation is not applicable on ____________.

A
Building

B
Plant and machinery

C
Live stock

D
Patents

Solution

Accounting standard-6, relating to depreciation is not applicable to the following items to which special considerations apply:
1. Forest, plantation, and similar regenerative natural resources.
2. Wasting assets including expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources.
3. Expenditure or research and develepoment.
4. Goodwill.
5. Live stock.
The statement also does not apply to land unless it has a limited useful life for the enterprise.
Question 7
1 / -0

Accounting Standard-6 relating to depreciation is applicable to___________.

A
Forests and plantations

B
Mines

C
Goodwill

D
Land if it has a limited useful life for the enterprise

Solution

Accounting Standard-6 deals with depreciation accounting and applies to all depreciable assets, except the following items to which special considerations apply:—
(i) forests, plantations and similar regenerative natural resources;
(ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non-regenerative resources;
(iii) expenditure on research and development;
(iv) goodwill and other intangible assets;
(v) live stock.
This standard also does not apply to land unless it has a limited useful life for the enterprise.
Question 8
1 / -0

Which one of the following statements is correct?

A
Depreciation is not the process of valuation of asset-it is a process of allocation of cost of asset to the period of its economic life.

B
If the cost of machinery is more than the book value, then depreciation need not be provided.

C
When the plant and machinery and maintained in good condition, through repairs and renewals, depreciation need not be provided.

D
In the absence of any legal provisions, if the auditor finds that provision made for depreciation is inadequate, then he is not required to refer to it in his report.

Solution

Option A is Correct One.
Depreciation is technically a method of allocation, not valuation, even though it determines the value placed on the asset in the balance sheet. Any business or income producing activity using tangible assets may incur costs related to those assets.
Question 9
1 / -0

According to ________ useful life of an asset is normally the period over which it is expected to be used.

A
AS 3

B
AS 6

C
AS 2

D
AS 4

Solution

Option B is correct One.
According to AS 6
(i) the period over which a depreciable asset is expected to be used by the enterprise; or
(ii) the number of production or similar units expected to be obtained from the use of the asset by the enterprise.
Question 10
1 / -0

Depreciation is allocation of _______________ amount.

A
Increase

B
Decrease

C
Valuable

D
Depreciable

Solution

Depreciation is provided on fixed assets on account of wear and tear of the asset by using them. Depreciation is provided on assets based on the useful life of the assets.
The main objective of providing depreciation is to allocate the depreciable value of asset to profit & loss account during the estimated life of the assets.

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Basics of Financial Mathematics Test 28

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Basics of Financial Mathematics Test 28

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Question 1

Historical cost of the asset

Depreciated value of the asset

Accumulated depreciation

Total depreciation for the period for each class of asset

Solution

Question 2

Land

Building

Plant

Furniture

Solution

Question 3

Appreciation

Depreciation

Reduction

Computation

Solution

Question 4

Discount

Depreciation

Reduction

None of these

Solution

Question 5

Historical cost of the asset

Market price of the asset

Replacement cost of asset

Any of the above

Solution

Question 6

Building

Plant and machinery

Live stock

Patents

Solution

Question 7

Forests and plantations

Mines

Goodwill

Land if it has a limited useful life for the enterprise

Solution

Question 8

Depreciation is not the process of valuation of asset-it is a process of allocation of cost of asset to the period of its economic life.

If the cost of machinery is more than the book value, then depreciation need not be provided.

When the plant and machinery and maintained in good condition, through repairs and renewals, depreciation need not be provided.

In the absence of any legal provisions, if the auditor finds that provision made for depreciation is inadequate, then he is not required to refer to it in his report.

Solution

Question 9

AS 3

AS 6

AS 2

AS 4

Solution

Question 10

Increase

Decrease

Valuable

Depreciable

Solution

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