Tag: accounting for depreciation

Questions Related to accounting for depreciation

The principal factor in measurement of depreciation is/are __________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. total cost

  2. residual value

  3. useful life

  4. all the three

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Correct Option: D
Explanation:

Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. Principle factor in measurement of depreciation are total cost of asset, useful life of asset, residual value of the asset.

Excel Enterprises purchased a plant having estimated useful life of $10$ years, however after $5$ years the remaining life of the asset is revised to $3$ years. Rs. $24,000$ being the remaining depreciable amount. The annual depreciation charge after revaluation of remaining life will be ____________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. $Rs.8,000$

  2. $Rs.4,800$

  3. $Rs.6,000$

  4. $Rs.8,500$

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Correct Option: A

If cost of an asset is Rs. $8,000$, life is $3$ years and estimated scrap value is Rs. $1,000$, the rate of depreciation under WDV method is ___________.

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. $33.3\%$ apprx

  2. $66.6\%$ apprx

  3. $53.6\%$ apprx

  4. $75\%$ apprx

Show answer
Correct Option: C

For charging depreciation, on which of the following assets the depletion method is adopted?

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Plant machinery.

  2. Land and building.

  3. Goodwill.

  4. Wasting assets like mines and quarries.

Show answer
Correct Option: D
Explanation:
Depletion method is used in case of mines, quarries etc. containing only a certain quantity of product. The depreciation is calculated by dividing the cost of asset by the estimated quantity of product likely to be available. Annual depreciation will be the quantity extracted multiplied by the rate per unit.

On $1.1.2015$, N Ltd has a stock of bottles valued at Rs$8,000$. On $1.7.2015$, they purchased additional bottles which amounted to Rs$5,000$ on $31.12.2015$, the stock of bottles were revalued at Rs$10,500$. Depreciation on bottle will be ____________ .

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Rs$13,000$

  2. Rs$8,000$

  3. Rs$2,500$

  4. Rs$10,500$

Show answer
Correct Option: C
Explanation:
Depreciation = opening value - Closing value 
                      = 8,000 + 5,000 - 10,500
                      = 2,500  

Z.Ltd had balance of Rs$4,000$ in its plant account and corresponding balance of accumulated depreciation account of that plant was Rs.$3,200$. This plant was exchanged for new plant. The payment for the new plant consisted of trade - in - allowance of Rs.$1,400$ for the old one and the balance Rs$4,600$ to be paid in cash. The old plant could have been sold for Rs.$1,000$. In relation to this transaction, which of the following statement is correct?

book keeping and accountancy accounting for depreciation factors for determining depreciation factors of depreciation need for depreciation and the factors affecting the amount of depreciation

  1. Provision for depreciation account will be credited by Rs$3,200$.

  2. Rs$5,600$ will be debited to New Plant Account.

  3. Profit & Loss Account will be debited by Rs$200$.

  4. All of the above

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Correct Option: B