Depreciation Accounting Hardest Test! Quiz

158 Questions | Total Attempts: 964

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Depreciation Accounting Hardest Test! Quiz - Quiz

Do you know anything about depreciation accounting? Do you believe you can pass the quiz? To calculate depreciation, you should use the straight-line method. Subtract the salvage amount from the asset cost and divide the balance by the number of periods in the asset's practical life. Take this quiz to understand more about depreciation accounting.


Questions and Answers
  • 1. 
    The number of production or similar units expected to be obtained from the use of an asset by an enterprise is called as ___________.
    • A. 

      Unit life

    • B. 

      Useful life

    • C. 

      Production life

    • D. 

      Expected life

  • 2. 
    M/s ABC Brothers, which was registered in the year 2000, has been M T P3/2006 22following Straight Line Method (SLM) of depreciation. In the current year it changed its method from Straight Line to Written Down Value (WDV) Method, since such change would result in the additional depreciation of Rs. 200 lakhs as a result of which the firm would qualify to be declared as a sick industrial unit. The a'uditor raised objection to this change in the method of depreciation. The objection of the auditor is justified because
    • A. 

      Change in the method of depreciation should be done only with the consent of the auditor

    • B. 

      Depreciation method can be changed only from WDV to SLM and not vice versa

    • C. 

      Change in the method of depreciation should be done only if it is required by some statute and change would result in appropriate presentation of financial statement

    • D. 

      Method of depreciation cannot be changed under any circumstances

  • 3. 
    Original cost = Rs 1,26,000. Salvage value = 6,000. Useful Life = 6 years. Annual depreciation under SLM will be
    • A. 

      Rs.21,000

    • B. 

      Rs.20,000

    • C. 

      Rs.15,000

    • D. 

      Rs.14,000

  • 4. 
    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
    • A. 

      Rs. 1,00,000

    • B. 

      Rs.80,000

    • C. 

      Rs.60,000

    • D. 

      Rs.20,000.

  • 5. 
    The portion of the acquisition cost of the asset, yet to be allocated to P/L A/C  is known as   _________________. 
    • A. 

      Book value

    • B. 

      Accumulated value

    • C. 

      Realisable value

    • D. 

      Salvage value

  • 6. 
    Amit Ltd. purchased a machine on 01.01.2003 for Rs 1,20,000. Installation expenses were Rs 10,000. Residual value after 10 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 is 10%. Annual Depreciation will be________ 
    • A. 

      Rs. 13,000

    • B. 

      Rs. 17,000

    • C. 

      Rs.21,000

    • D. 

      Rs.25,000

  • 7. 
    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. Profit/Loss on sale of the machinery will be 
    • A. 

      13,200 Profit

    • B. 

      13,200 loss

    • C. 

      6,800 profit

    • D. 

      6,800 loss

  • 8. 
    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
    • A. 

      Rs.6,000

    • B. 

      Rs.12,000

    • C. 

      Rs. 18,000

    • D. 

      Rs. 36,000

  • 9. 
    Depreciation of fixed assets is an example of  ______________  expenditure.
    • A. 

      Revenue

    • B. 

      Deferred revenue,

    • C. 

      Capital

    • D. 

      None of the above

  • 10. 
    In ______________ method,depreciation is charged by allocating depreciable cost in proposition of the annual output to the probable life-time output.
    • A. 

      Working hours method

    • B. 

      Replacement method

    • C. 

      Revaluation method

    • D. 

      Production units method

  • 11. 
    A firm purchases a 5 years" lease for Rs, 40,000 on 1st January. It decides to write off depreciation on the Annuity method, presuming the rate of interest to be 5% per annum. The annuity for it is 0.230975. The amount of annual depreciation will be
    • A. 

      Rs.8,000

    • B. 

      Rs.2,000

    • C. 

      Rs.9,239

    • D. 

      Rs.6,000

  • 12. 
    The balance of machine on 31st March 2006 is Rs.72,900. The machine was purchased on 1st April 2003 charging depreciation @10% p.a. by diminishing Balance method. The cost price of the machine as on 1st April 2003 would be
    • A. 

      Rs. 1,00,000

    • B. 

      Rs. 90,000

    • C. 

      Rs. 81,000

    • D. 

      Rs. 72,900

  • 13. 
    On 1st January, 2005, Alpha Ltd. purchased" a machine for Rs.50,000 and spent Rs.4,000 on its carriage and Rs.2,000 on its installation. On the date of purchase, it was estimated that the effective life of the machine will be 10 years and after 10 years its scrap value will be Rs.6,000. Depreciation is charged on straight line basis. Depreciation for the year 2005 will be
    • A. 

      Rs.4,600

    • B. 

      Rs.5,000

    • C. 

      Rs.4,800

    • D. 

      Rs.4,500

  • 14. 
    A transport company purchases a truck for Rs.2,00,000 on 1st January, 2005. It charges 20% depreciation p.a. according to w.d.v. method. The truck was sold on 1st July, 2006 for a sum of Rs.1,60,000. The profit or loss on sale of truck is
    • A. 

      Loss of Rs. 16,000.

    • B. 

      Profit of Rs. 16,000.

    • C. 

      Profit of Rs. 12,000.

    • D. 

      Loss of Rs. 12,000.

  • 15. 
    A machine purchased on 1st April 2004 for Rs. 10,000 is showing a  balance of Rs. 6,000 as on 1st April 2006 when depreciation is charged on S.L.M. basis. Now, company wants to switch over to W.D.V method charging depreciation @ 20%. The amount of excess/ short depreciation of last two years will be
    • A. 

      Excess depreciation Rs.400

    • B. 

      Short depreciation Rs.400

    • C. 

      Excess depreciation Rs. 1,600

    • D. 

      Short depreciation Rs. 1,600

  • 16. 
    Books of Ekta, shows on 1st January 2006 furniture Rs. 20,000. During the year a part of the furniture whose book value on 1st January 2006 is Rs. 1,200 has been exchanged with another furniture by paying additional Rs. 500. Ekta charge depreciation @ 10% p.a. The net amount of the ifurniture to be shown in the balance sheet will be 
    • A. 

      Rs 18,508

    • B. 

      Rs 20,440

    • C. 

      Rs 18,396

    • D. 

      Rs 18,450.

  • 17. 
    Under straight iine method, depreciation is calculated on
    • A. 

      Written down value.

    • B. 

      Scrap value,

    • C. 

      Original cost.

    • D. 

      None of the three.

  • 18. 
    Scrap value of an asset means the amount that it can fetch on sale at the ___________   of its useful life.
    • A. 

      Beginning.

    • B. 

      End.

    • C. 

      Middle.

    • D. 

      None of the three.

  • 19. 
    The balance of furniture and fixtures as on 1st April, 2005 was Rs.10,000.Furniture of Rs.5,000 was purchased on 1st October, 2005. Depreciation is charged @ 10% p.a. on .W.D.V. method. The depreciation for the yearq ended 31st March, 2006 will be
    • A. 

      Rs. 1,500.

    • B. 

      Rs. 1,250.

    • C. 

      Rs. 1,750.

    • D. 

      None of the above

  • 20. 
    A Ltd. Company purchase machinery on 1st April, 2004 for Rs.1,00,000.The depreciation on this machinery is charged @ 10% per annum on straight line method. On 30th September, 2006 machinery is sold for Rs.89,000. The pfofit or loss on sale of such machinery is:
    • A. 

      Profit of Rs.12,000.

    • B. 

      Loss of Rs.12,000.

    • C. 

      Profit of Rs. 14,000.

    • D. 

      Loss of Rs.6,000.

  • 21. 
    On 1.1.2005,a machine costing Rs.10,000 and a piece of furniture costing Rs.20,000 was purchased.Depreciation is provided @ 5% on furniture and 10% per annum on machine .The depreciation for the year ended 31 st March,2005 should be :
    • A. 

      Rs.1,000

    • B. 

      Rs.300

    • C. 

      Rs.500

    • D. 

      None of the above

  • 22. 
    The value of an asset after deducting depreciation from the historical  cost is known as :
    • A. 

      Fair vaiue.

    • B. 

      Book value,

    • C. 

      Market value,

    • D. 

      Net realisable value.

  • 23. 
    Under this method, the annual charge for depreciation decreases from year to year, so that the burden and benefits of later years are shared by the earlier years. Also, under this method, the value of asset can never be completely extinguished. The other advantage of this method is that the total charge to revenue is uniform when the depreciation is high, repairs are negligible; and as the repairs increase, the burden of depreciation gets lesser and lesser. This method of depreciation is : 
    • A. 

      Straight Line Method

    • B. 

      Written Down Value Method

    • C. 

      Annuity Method

    • D. 

      Sinking Fund Method

  • 24. 
    Depreciable amount of the machinery is Rs.11,00,000. The machine is M.T P5/2007 46 expected to produce 30 lakhs units in its 10 year life and expected distribution of production units is as follows: 1-3 year 5 lacs units each year. 4-6 year 3 lacs units each year. 7-10 year 1.5 lacs units each year. Annual depreciation for 1-3 year, using production units method will be
    • A. 

      Rs. 1,10,000.

    • B. 

      Rs. 55,000.

    • C. 

      Rs. 65,000.

    • D. 

      Rs. 1,83,333.

  • 25. 
    A lease is purchased on 1st January, 2005 for 4 years at a cost of Rs1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be__________________
    • A. 

      Rs. 28,201.

    • B. 

      Rs. 20,000.

    • C. 

      Rs. 25,000.

    • D. 

      None of the above.

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