Basics of Financial Mathematics Test 31

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Basics of Financial Mathematics Test 31

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Weekly Quiz Competition

Question 1
1 / -0

The depreciation is an expense accruing ______________.

A
from the consumption of some readily consumable assets

B
from the use of fixed assets

C
from the use of various services

D
from the use of current asset

Solution

Companies use their cash flow to make payments for fixed assets. Depreciation spreads the expense of a fixed asset over the years of the estimated useful life of the asset. The accounting entries for depreciation are a debit to depreciation expense and a credit to fixed asset depreciation accumulation.
Question 2
1 / -0

The amount of annual instalment to depreciation funds is ______________.

A
A charge against profits

B
An appropriation of profits

C
May be charge or appropriation of profits

D
Neither a charge nor appropriation of profit

Solution

Option A is the correct one.

The annual charge to profit and loss account/income statement for depreciation(it’s charge against profit) is based upon an estimate of how much of the overall economic usefulness of a fixed asset has been used up in that accounting period.
Question 3
1 / -0

The compound interest on Rs. 5,000 for two years at 4% is

A
Rs. 400

B
Rs. 408

C
Rs. 420

D
Rs. 440

Solution

SOLUTION:
The formula for compound interest is:
$$A=P (1+\dfrac{r}{n})^{nt}$$
$$A=5000(1+\dfrac{4}{100})^{2}$$
$$A= 5408$$
$$interest = P -A = 408$$
hence the correct opt: B
Question 4
1 / -0

The value of a car depreciates every year at the rate of 10% on its value at the beginning of the year. If the present value of the car is Rs 52,488 its worth four years ago was

A
$$Rs\ 68.232$$

B
$$Rs\ 68.234$$

C
$$Rs\ 69.862$$

D
$$Rs\ 80,000$$

Solution

Present Value $$A= Rs.52,488$$
Depreciation rate $$r = 10\%$$ per annum
Time $$t = 4$$ years
Let initial value be $$ P $$
We know the formula, $$\displaystyle A=P(1-\dfrac{r}{100})^t$$
Substituting the given values, we get.
$$52,488 = P[1-\dfrac{10}{100}]^4$$
$$52,488 = P(0.9)^4$$
$$P=\dfrac{52488}{0.6561}$$
$$P = Rs. 80,000$$
Question 5
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Plant asset are depreciated over their useful lives. Which basic principle of accounting does this procedure reflect?

A
Historical cost.

B
Matching expenses with revenue.

C
Consistency.

D
Objectivity.

Solution

Matching expenses with revenue.

The purpose of depreciation is to match the cost of a productive asset (that has a useful life of more than a year to the revenues earned from using the asset. Since it is hard to see a direct link to revenues, the asset’s cost is usually allocated to the years in which the asset is used. Depreciation systematically allocates or moves the asset’s cost from the balance sheet to expense on the income statement over the asset’s useful life. In other words, depreciation is an allocation process in order to achieve the matching principle; it is not a technique for determining the fair market value of the asset.
Question 6
1 / -0

The main purpose of depreciation accounting is to _____________.

A
charge the cost of asset

B
allocate the cost of the asset over its estimated useful life

C
provide for replacement of the asset on the expiry of is useful life

D
value the assets on the closing date of the year

Solution

It is necessary to distribute the cost of a fixed asset, less the scrap or salvage value after the useful life of the asset is over, in such a way so as to allocate it as equitably as possible to the periods during which the benefits are received from the use of fixed assets. This system of procedure is called depreciation accounting.
Question 7
1 / -0

The VDIS-Voluntary Disclosure of Income Scheme was the brainchild of ______________.

A
P.Chidambaram

B
Ram Jethmalani

C
Atal Behari Vajpayee

D
Sonia Gandhi

Solution

Voluntary Disclosure of Income Scheme (VDIS) was the brainchild of P Chidambaram. Chidambaram introduced the scheme in the 1997-98 budget, had actually targeted an ancient mindset : a man pays tax only when he is bludhgeoned.
Question 8
1 / -0

According to $$AS-6$$, 'Depreciable assets' are assets which __________.

A
Are expected to be used during more than one accounting period

B
Have a limited useful life

C
Are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business

D
All of the above

Solution

According to $$AS-6$$, 'Depreciable assets' are assets that are expected to be used during more than one accounting period have a limited useful life are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business
Question 9
1 / -0

Which of the following is correct? Depreciable assets are those assets which:
(1) Are expected to be used for more than one accounting period.
(2) Have a limited useful life
(3) Are held for the purpose of re-sale
(4) None of these

A
1 and 2

B
2 and 3

C
2 and 4

D
1 and 3

Solution

Depreciable assets are those assets which
1. Are expected to be used for more than one accounting period i.e. fixed assets
2. Have a limited useful life.
Depreciation is a decrease in the value of the fixed assets due to wear and tear, obsolescence and passage of time.
Depreciation is charged only on the fixed Tangible Assets.
Question 10
1 / -0

What is the interest amount on a sum of Rs. 2500 at 12% Compound Interest for 2 years?

A
Rs. 325

B
Rs. 636

C
Rs. 450

D
Rs. 500

Solution

solution:
A = p($$1+\dfrac{r}{n} )^{nt}$$
A = 2500($$1+\dfrac{12}{100} )^{2}$$
A=3136
interest amount = A-P 3136- 2500 = 636
hence the correct option: B

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Basics of Financial Mathematics Test 31

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Question 1

from the consumption of some readily consumable assets

from the use of fixed assets

from the use of various services

from the use of current asset

Solution

Question 2

A charge against profits

An appropriation of profits

May be charge or appropriation of profits

Neither a charge nor appropriation of profit

Solution

Question 3

Rs. 400

Rs. 408

Rs. 420

Rs. 440

Solution

Question 4

$$Rs\ 68.232$$

$$Rs\ 68.234$$

$$Rs\ 69.862$$

$$Rs\ 80,000$$

Solution

Question 5

Historical cost.

Matching expenses with revenue.

Consistency.

Objectivity.

Solution

Question 6

charge the cost of asset

allocate the cost of the asset over its estimated useful life

provide for replacement of the asset on the expiry of is useful life

value the assets on the closing date of the year

Solution

Question 7

P.Chidambaram

Ram Jethmalani

Atal Behari Vajpayee

Sonia Gandhi

Solution

Question 8

Are expected to be used during more than one accounting period

Have a limited useful life

Are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business

All of the above

Solution

Question 9

1 and 2

2 and 3

2 and 4

1 and 3

Solution

Question 10

Rs. 325

Rs. 636

Rs. 450

Rs. 500

Solution

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