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# Test: Depreciation Accounting - 4

## 30 Questions MCQ Test Fundamentals of Accounting for CA CPT | Test: Depreciation Accounting - 4

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QUESTION: 1

Solution:
QUESTION: 2

Solution:
QUESTION: 3

### A new machine costing Rs.1 lakh was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scrap value at Rs.10000. The production plan for the next 5 years using the above machine is as follows:   Q.The depreciation expenditure for the 4th year under units-of-production method will be

Solution:
QUESTION: 4

A new machine costing Rs.1 lakh was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scrap value at Rs.10000. The production plan for the next 5 years using the above machine is as follows:

Q.The depreciation expenditure for the 5th year under units-of-production method will be

Solution:
QUESTION: 5

Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs.1,00,000.
III. Residual value of the asset at the end of useful life = Rs.40,960.

Q.The estimated useful life of the asset, in years, is

Solution:
QUESTION: 6

Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs.1,00,000.
III. Residual value of the asset at the end of useful life = Rs.40,960.

Q.Depreciation for 1st year =

Solution:
QUESTION: 7

Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs.1,00,000.
III. Residual value of the asset at the end of useful life = Rs.40,960.

Q.Depreciation for 2nd year =

Solution:
QUESTION: 8

Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs.1,00,000.
III. Residual value of the asset at the end of useful life = Rs.40,960.

Q.Depreciation for 3rd year =

Solution:
QUESTION: 9

Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs.1,00,000.
III. Residual value of the asset at the end of useful life = Rs.40,960.

Q.Depreciation for 4th year =

Solution:
QUESTION: 10

On October 1, 2001 two machines costing Rs.20,000 and Rs.15,000 respectively, were purchased.
On March 31, 2005, both the machines had to be discarded because of damage and had to be replaced by two machines costing Rs.25,000 and Rs.20,000 respectively.

One of the discarded machine was sold for Rs.10,000 and against the other it was expected that Rs.5,000 would be realized. The firm provides depreciation @15% on written down value

Q.Depreciation for the 2003-04 year =

Solution:
QUESTION: 11

On October 1, 2001 two machines costing Rs.20,000 and Rs.15,000 respectively, were purchased.
On March 31, 2005, both the machines had to be discarded because of damage and had to be replaced by two machines costing Rs.25,000 and Rs.20,000 respectively.

One of the discarded machine was sold for Rs.10,000 and against the other it was expected that Rs.5,000 would be realized. The firm provides depreciation @15% on written down value

Q.The total amount of depreciation written off on the two machines till they were discarded is

Solution:
QUESTION: 12

In the books of D Ltd. the machinery account shows a debit balance of Rs.60,000 as on April 1,2003.The machinery was sold on September 30,2004 for Rs.30,000. The company charges depreciation @20% p.a. on diminishing balance method.

Q.Depreciation for 2003-04 =

Solution:
QUESTION: 13

In the books of D Ltd. the machinery account shows a debit balance of Rs.60,000 as on April 1,2003.The machinery was sold on September 30,2004 for Rs.30,000. The company charges depreciation @20% p.a. on diminishing balance method.

Q.Depreciation for 2004-05 =

Solution:

Explanation : Dep for April 2004 to March 2005

60000 - 20/100 * 60000

= 48000

Dep for April 2005 to Sep 2005(6 months)

= 6/12 * 48000 * 20/100

= 4800

QUESTION: 14

In the books of D Ltd. the machinery account shows a debit balance of Rs.60,000 as on April 1,2003.The machinery was sold on September 30,2004 for Rs.30,000. The company charges depreciation @20% p.a. on diminishing balance method.

Q.Profit / Loss on sale =

Solution:
QUESTION: 15

Consider the following data pertaining to M/s. E Ltd. who constructed a cinema house:

Solution:
QUESTION: 16

H Ltd. purchased a machinery on April 01, 2000 for Rs.3,00,000. It is estimated that the machinery will have a useful life of 5 years after which it will have no salvage value. If the company follows sum-of-the-years’-digits method of depreciation, the amount of depreciation charged during the year 2004-05 was

Solution:
QUESTION: 17

On August 01,2002, K Travels Ltd. bought four Matador vans costing Rs.1,20,000 each.The company expected to fetch a scrap value of 25% of the cost price of the vehicles after ten years. The vehicles were depreciated under the fixed installment method up to March 31, 2005. With effect from April 01, 2005, the company decided to introduce the diminishing balance method of depreciation @ 20% p.a. instead of the fixed installment method. The company sold one of the vans at Rs.70,000 on March 31, 2005. The rate of depreciation charged up to March 31, 2005 was

Solution:
QUESTION: 18

Akhil Ltd. imported a machine on 01.07.2002 for Rs 1,28,000, paid customs duty and freight Rs 64,000 and incurred erection charges Rs 48,000. Another local machinery costing Rs 80,000 was purchased on 01.01.2003. On 01.07.2004, a portion of the imported machinery ( value one-third ) got out of order and was sold for Rs 27,840. Another machinery was purchased to replace the same for Rs 40,000. Depreciation is to be calculated at 20% p.a.

Q.Profit / Loss on sale = ______.

Solution:

Machinery Account of X Ltd

Debit.                                                          Credit.

Date Particulars Amount(Rs) Date Particulars Amount(Rs)

2011                                     2012

Oct.1 Bank A/c  2,40,000 Mar. 31 Depreciation A/c

M1                        80,000     M1                 8,000

M2                     1,60,000     M2               16,000 24,000

Balance c/d

M1                                     72,000

M2                                   1,44,000              2,16,000

2,40,000                                  2,40,000

2012     2013

Apr. 01 Balance b/d    Mar.31 Depreciation A/c

M1                       72,000                   M1                                         16,000

M2                     1,44,000 2,16,000   M2                                         32,000

Apr.01 Bank A/c (M3) 80,000   M3                                         16,000 64,000

Mar.31 Balance c/d

M1                                         56,000

M2                                       1,12,000

M3                                          64,000 2,32,000

2,96,000     2,96,000

2013     2013

Apr. 01 Balance b/d    Oct. 01 Depreciation A/c (on M1 for 6 months) 8,000

M1                         56,000     Bank A/c (Sale of M1) 27,840

M2                        1,12,000     Profit and Loss A/c (Loss on Sale) 20,160

M3                          64,000 2,32,000 2014

Mar.31 Depreciation on-

Oct.01 Bank A/c (M4) 40,000   M2                                      32,000

M3                                      16,000

M4                                         4,000 52,000

Mar.31 Balance c/d

M2                                       80,000

M3                                       48,000

M4                                        36,000 1,64,000

2,72,000     2,72,000

Particulars                                   Amount

Value of M1 as on Apr. 01, 2013   56,000

Depreciation for 6 months(loss)   8,000

Value of M1 as on Oct. 01, 2013   48,000

Sale Value(loss)                           27,840

Net Loss on Sale                           20,160

QUESTION: 19

Akhil Ltd. imported a machine on 01.07.2002 for Rs 1,28,000, paid customs duty and freight Rs 64,000 and incurred erection charges Rs 48,000. Another local machinery costing Rs 80,000 was purchased on 01.01.2003. On 01.07.2004, a portion of the imported machinery ( value one-third ) got out of order and was sold for Rs 27,840. Another machinery was purchased to replace the same for Rs 40,000. Depreciation is to be calculated at 20% p.a.

Q.Closing balance of Machinery = ___________.

Solution:
QUESTION: 20

On 01.01.2001, a new plant was purchased by Mrs. Shweta Periwal for Rs 1,00,000 and a further sum of Rs 5,000 was spent on installation. On 01.06.2002, another plant was acquired for Rs 65,000. On 02.10.2003, the first plant was totally destroyed and the amount of Rs 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a second hand plant was purchased for Rs 75,000 and a further sum of Rs 7,500 was spent for repairs and Rs 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been provided @ 10% on the original cost annually on 31st December. It was the practice to provide depreciation for full year on all acquisitions made at any time during the year and to ignore the depreciation on any time sold during the year.

In December 2003, it is decided to change the method of depreciation and to follow the rate of 15% on diminishing balance method with retrospective effect in respect of the existing items of plant and to make necessary adjustments on 31.12.2003.

Q.Closing balance in Plant A/c = ____________.

Solution:
QUESTION: 21

On 01.01.2001, a new plant was purchased by Mrs. Shweta Periwal for Rs 1,00,000 and a further sum of Rs 5,000 was spent on installation. On 01.06.2002, another plant was acquired for Rs 65,000. On 02.10.2003, the first plant was totally destroyed and the amount of Rs 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a second hand plant was purchased for Rs 75,000 and a further sum of Rs 7,500 was spent for repairs and Rs 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been provided @ 10% on the original cost annually on 31st December. It was the practice to provide depreciation for full year on all acquisitions made at any time during the year and to ignore the depreciation on any time sold during the year.

In December 2003, it is decided to change the method of depreciation and to follow the rate of 15% on diminishing balance method with retrospective effect in respect of the existing items of plant and to make necessary adjustments on 31.12.2003.

Q.Closing balance in Provision for Depreciation A/c = _________.

Solution:
QUESTION: 22

On 01.01.2001, a new plant was purchased by Mrs. Shweta Periwal for Rs 1,00,000 and a further sum of Rs 5,000 was spent on installation. On 01.06.2002, another plant was acquired for Rs 65,000. On 02.10.2003, the first plant was totally destroyed and the amount of Rs 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a second hand plant was purchased for Rs 75,000 and a further sum of Rs 7,500 was spent for repairs and Rs 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been provided @ 10% on the original cost annually on 31st December. It was the practice to provide depreciation for full year on all acquisitions made at any time during the year and to ignore the depreciation on any time sold during the year.

In December 2003, it is decided to change the method of depreciation and to follow the rate of 15% on diminishing balance method with retrospective effect in respect of the existing items of plant and to make necessary adjustments on 31.12.2003.

Q.Profit / Loss on Plant sold = _________.

Solution:
QUESTION: 23

On 01.01.2001, a new plant was purchased by Mrs. Shweta Periwal for Rs 1,00,000 and a further sum of Rs 5,000 was spent on installation. On 01.06.2002, another plant was acquired for Rs 65,000. On 02.10.2003, the first plant was totally destroyed and the amount of Rs 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a second hand plant was purchased for Rs 75,000 and a further sum of Rs 7,500 was spent for repairs and Rs 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been provided @ 10% on the original cost annually on 31st December. It was the practice to provide depreciation for full year on all acquisitions made at any time during the year and to ignore the depreciation on any time sold during the year.

In December 2003, it is decided to change the method of depreciation and to follow the rate of 15% on diminishing balance method with retrospective effect in respect of the existing items of plant and to make necessary adjustments on 31.12.2003.

Q.Depreciation over / under charged = _________.

Solution:
QUESTION: 24

Glass, Cutlery etc. : Balance on 01.01.2004 is Rs 28,000. Glass, Cutlery, etc. purchased during the year Rs 16,000. Depreciation is to be charged on the above assets as follows – 1/5th of their values is to be written off in the year of purchase and 2/5th in each of the next 2 years. Of the stock of Glass, Cutlery, etc. as on 01.01.2004, ½ was one year old and ½ was 2 years old.  Purchases are made on 1st January.

Q.Depreciation for 3rd year = ________.

Solution:
QUESTION: 25

Glass, Cutlery etc. : Balance on 01.01.2004 is Rs 28,000. Glass, Cutlery, etc. purchased during the year Rs 16,000. Depreciation is to be charged on the above assets as follows – 1/5th of their values is to be written off in the year of purchase and 2/5th in each of the next 2 years. Of the stock of Glass, Cutlery, etc. as on 01.01.2004, ½ was one year old and ½ was 2 years old.  Purchases are made on 1st January.

Q.Closing Balance in Glass, Cutlery A/c = ________.

Solution:
*Multiple options can be correct
QUESTION: 26

Choose the correct answer(more than one)

Q.Which of the following is correct? Depreciable assets are those assets which –

Solution:
*Multiple options can be correct
QUESTION: 27

Which of the following is of a capital nature?

Solution:
*Multiple options can be correct
QUESTION: 28

In which of the following methods, the cost of the asset is not spread over in equal proportion during its useful economic life?

Solution:
QUESTION: 29

Which of the following statements is false

Solution:
*Multiple options can be correct
QUESTION: 30

Which of the following assets is usually assumed to be not depreciating?

Solution:

Land is not depreciated, since it has an unlimited useful life. If land has a limited useful life, as is the case with a quarry, then it is acceptable to depreciate it over its useful life