Test: Depreciation Accounting - 3


30 Questions MCQ Test Principles and Practice of Accounting | Test: Depreciation Accounting - 3


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QUESTION: 1

Useful life of an asset can be described as : 

Solution:
QUESTION: 2

If depreciation rate is equal, the amount of depreciation in SLM method as compared to WDV method will be _________

Solution:
QUESTION: 3

The main objective of providing depreciation is to : 

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QUESTION: 4

Rohan Ltd. is in the business of extracting Coal from Mines. It should charge depreciation as per:

Solution:
QUESTION: 5

 Cost of an asset Rs. 75,000. Useful life is 4 years. Find out the depreciation for the 1st year under sum of years digit method: 

Solution:
QUESTION: 6

The W.D.V. of an asset after there years of depreciation on the reducing balance method @ 10% p.a. is Rs. 36,450. What was its original value?

Solution:

Value of asset at the end of 2nd year = value at the end of 3rd year x 100/90

                                                                = 36,450 x 100/90 

                                                                = RS-40,500.

Value of asset at the end of 1st year = value at the end of 2nd year x 100/90

                                                             = 40,500 x 100/90

                                                             = RS-45,000.

Original value =  Value at the end of 1st year x 100/90

                        = 45,000 x 100/90

                        = RS-50,000.

QUESTION: 7

A machine purchased for Rs. 5, 00,000 has an estimated working life of 10,000 hours, scrap value estimated Rs. 1, 00,000. Their anticipated pattern of working hours is as follows:
Year Hours (p.a) 
1-2 1500 
3-6 1000 
7-10 750 
Depreciation for the third year would be:

Solution:
QUESTION: 8

Original Cost   = Rs. 1,26,000
Salvage Value = Rs. 6,000
Useful Life      = 6 year
What will be the book value of the asset as at the beginning of fourth year: (Under Sum of Year’s digits method)

Solution:
QUESTION: 9

Which method of depreciation takes into account the element of Interest on Capital outlay: 

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QUESTION: 10

Scrap value of an asset means the amount it can fetch on sale at the ______of its useful life :

Solution:
QUESTION: 11

___________method of depreciation takes into account the element of interest on capital outlay and seeks to write off the value of the asset as well as the interest lost over the life of the asset: 

Solution:
QUESTION: 12

Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will be 

Solution:
QUESTION: 13

 Depreciation starts on a machine from the date: 

Solution:
QUESTION: 14

Which method of depreciation is suitable when expenditure on repairs and maintenance, increases as the machine grows old?

Solution:
QUESTION: 15

Annuity method is designed for which of the following : 

Solution:
QUESTION: 16

Vijay Traders purchased Car on 1.4.08 for Rs. 3,00,000. They are charging depreciation on written Down Value method. On 31.3.09 they sold the Car for Rs. 1,65,000 and incurred a loss of Rs. 7,5000. The rate of depreciation p.a. is :-

Solution:
QUESTION: 17

Cost of machinery  Rs. 2,52,000
Salvage value         Rs. 12,000
Useful life               6 years
Annual depreciation under straight line method will be :

Solution:
QUESTION: 18

Which of the following is the meaning of entry stated in the machinery A/c 

Solution:
QUESTION: 19

Which of the following statements is/are false?
I. The term ‘depreciation’, ‘depletion’ and ‘amortization’ convey the same meaning.
II. Provision for depreciation A/c is debited when provision for depreciation A/c is created.
III. The main purpose of charging the profit and loss A/c with the amount of depreciation is to spread the cost of an asset over its useful life for the purpose of income determination.

Solution:
QUESTION: 20

A mine was taken on lease for Rs. 2,00,00,000. Its total production capacity is 4,00,000 mt. What will be the depreciation in 2007 if it produced 30,000 m.t. in 2007?

Solution:
QUESTION: 21

A purchased a mine for Rs. 2,50,000 minerals in the mine were expected to be 5,00,000 tonnes. In the first year, 50,000 tones of minerals were used. What is the depreciation for the first year?

Solution:
QUESTION: 22

Amit Ltd. purchased a machine on 01.01.2003 for Rs. 1,20,000. Installation expenses were Rs. 10,000. Residual value after 5 years Rs. 5,000. On 01.07.2003, expenses for repairs were incurred to the extent of Rs. 2,000. Depreciation is provided under straight line method. Depreciation rate = 10%. Annual Depreciation = _________.

Solution:
QUESTION: 23

Price of the computer = Rs. 50,000
Residual value = Rs. 10,000
Hours worked for the year = 6000 hrs.
Estimated life of computer = 20,000 hrs.
Calculate the amount of depreciation  

Solution:
QUESTION: 24

A machine was purchased on 1st April, 2007 for Rs. 5,00,000 and 1st October, 2007 for Rs. 2,00,000. Calculate depreciation @ 20% p.a. on written down value method for the year ending 31st March, 2008.

Solution:
QUESTION: 25

 The number of production or similar units expected to be obtained from the use of an asset by an enterprise is called as 

Solution:
QUESTION: 26

Cost of Machine Rs. 1, 00,000 scrap value Rs. 10,000 and life is 4 years. What will be amount of depreciation according to sum of years digits method in the 3rd year?

Solution:
QUESTION: 27

A depreciable asset may suffer obsolescence due to:

Solution:
QUESTION: 28

 Under Annuity method Asset A/c is debited by : 

Solution:
QUESTION: 29

Under annuity method, the amount of depreciation is :

Solution:
QUESTION: 30

Which of the following is the meaning of entry stated in the machinery A/c? 

Solution:

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