MCQs on depreciation in accounting: 28 Multiple choice questions with answers on depreciation are provided in this post.
[1] Cost of a machine = ~ 1,12,500 salvage value = ~ 10,500 Useful Life = 5 Years Deprecation for the last year using the Sum of digits method will be:
(a) ~ 6,800
(b) ~ 20,400
(c) ~ 34,000
(d) ~ 27,200
ANSWER-(a)
[2] Depreciation starts on a machine from the date:
(a) It is purchased
(b) It is put to use
(c) It is installed
(d) Any of above
ANSWER-(b)
[3] A trader purchased a machinery for ~ 10,000 in Jan 2004. Depreciation is charged @ 25% diminishing balance. At the end of third year it was sold for ~ 1,000. Profit or Loss on sale of machine will be:
(a) Profit ~ 2,400
(b) Profit ~ 2,300
(c) Loss ~ 2,406
(d) Loss ~ 3,219
ANSWER-(d)
[4] Cost of machinery ~ 2,52,000 Salvage value ~ 12,000 Useful life 6 years Annual depreciation under straight line method will be:
(a) ~ 42,000
(b) ~ 40,000
(c) ~ 15,000
(d) ~ 28,000
ANSWER-(b)
[5] Which of the following is Depleted?
(a) Land
(b) Goodwill
(c) Machinery
(d) Coal Mines
ANSWER-(d)
[6] A machine was purchased on 1 st April, 2007 for ~ 5,00,000 and pt October, 2007 for ~ 2,00,000. Calculate depreciation @ 20% p.a on written down value method for the year ending 31 st March, 2008.
(a) ~ 1,00,000
(b) ~ 1,40,000
(c) ~ 40,000
(d) ~ 1,20,000
ANSWER-(d)
[7] A machinery is depreciated by ~ 2,000 every year. Which method is being used to calculate depreciation?
(a) Written Down value method
(b) Straight line method
(c) Sum of Years Digit method
(d) None of these .
ANSWER-(b)
[8] A purchased a mine for ~ 2,50,000 minerals in the mine were expected to be 5,00,000 tonnes. In the first year, 50,000 tonnes of minerals were used. What is the depreciation for the first year?
(a) ~ 20,000
(b) ~ 25,000
(c) ~ 30,000
(d) ~ 35,000
ANSWER-(b)
[9] A machine was purchased for ~ 50,000. Installation expenses amounted to ~ 2,000 wages of ~ 4,000 were paid on installation.’ The scrap value at the end of its useful life of 10 years is ~ 6,000. Repairs of ~ 6,000 was made after 6 months from the date of purchase. Calculate depreciation
(a) ~ 5,600
(b) ~ 4,800
(c) ~ 5,000 .
(d) None
ANSWER-(c)
[10] Which method of depreciation is suitable when expenditure on repairs and maintenance, increases as the machine grows old?
(a) Reducing balance method
(b) Straight line method
(c) Machine hour rate method
(d) Sinking fund Method.
ANSWER-(a)
[11] Depletion method of depreciation is normally applied in case of __ assets.
(a) intangible
(b) tangible
(c) wasting
(d) current
ANSWER-(c)
[12] __ 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:
(a) Sum of year’s digits .
(b) Annuity
(c) Sinking Fund
(d) Straight line
ANSWER-(b)
[13] Vijay Traders purchased Car on 1.4.08 for ~ 3,00,000. They are charging depreciation on written Down Value method. On 31.3.09 they sold the Car for ~ 1,65,000 and incurred a loss of ~ 75,000. The rate of depreciation p.a. is:
(a) 10%
(b) 15%
(c) 20%
(d) 25%
ANSWER-(c)
[14] Depreciation is to be calculated from the date of:
(a) Asset put to use
(b) Purchase order of asset
(c) Receipt of asset at business premise
(d) Invoice of Assets.
ANSWER-(a)
[15] According to the Income Tax Act, which method of Charging depreciation is provided?
(a) Reducing Balance Method
(b) Sinking Fund
(c) Annuity Method
(d) Straight Line Method.
ANSWER-(a)
[16] Which method of depreciation is effective if repairs and maintenance cost of an asset increases as it grows old:
(a) Straight Line Method
(b) Sinking Fund
(c) Annuity
(d) Reducing Balance.
ANSWER-(d)
[17] In case of reducing balance method of charging depreciation, depreciation is charged on the:
(a) Original Cost
(b) Original Cost less Scrap value
(c) Market Value
(d) Written Down Value
ANSWER-(d)
[18] Estimated useful life of a machinery is 5 yrs. Depreciation written off in second year under sum of years digit method would be:
(a) 4/15
(b) 3115
(c) 2115
(d) 1/15
ANSWER-(a)
[19] Where a machine produces products of uniform size, the of depreciation is applied:-
(a) machine hour method
(b) sinking Fund method
(c) annuity method
(d) production units.
ANSWER-(d)
[20] A depreciable asset may ‘suffer obsolescence due to:-
(a) Passage of time
(b) Wear and tear
(c) Technological Changes
(d) None of the above.
ANSWER-(c)
[21] method shall be Efficient, if repairs and maintenance cost of an asset increases as it grows older:- (a) Straight Line
(b) Reducing Balance
(c) Sinking Fund
(d) Annuity. ANSWER-(b)
[22] Cost of Machine ~ 1,00,000, scrap value ~ 10,000 and life is 4 years. What will bethe amount of depreciation according to sum of years digits method in the 3rd year?
(a) ~ 40,000
(b) ~ 27,000
(c) ~ 9,000
(d) ~ 18,000
ANSWER-(d)
[23] Machinery has a life of 4 years. If it is depreciated by the Reducing Balance Method, at the end of 4 years, its book value is 24% of its Original Cost. The rate of depreciation applied is:
(a) 24%
(b) 26%
(c) 30%
(d) 32%
[24] The amount of depreciation under straight line method.
(a) remains fixed for all year
(b) decreases every year
(c) revalued every year
(d) increases every year
ANSWER-(a)
[25] The portion of the acquisition cost of the asset, yet to be allocated is known as:
(a) Written down value
(b) Accumulated value
(c) Realisable value
(d) Salvage value.
ANSWER-(a)
[26] Cost of the plant ~ 4,00,000 scrap value ~ 40,000 and useful life 4years. What will be amount of
depreciation according to sum of years digits method in the firstyear?
(a) ~ 90,000
. (b) ~ 1,44,000
(c) ~ 1,00,000
(d) ~ 2,40,000
ANSWER-(b)
[27] For charging depreciation, on which of the following assets, the depletion method is adopted?
(a) Plant and Machinery
(b) Wasting assets like mines and
quarries
(c) Buildings
(d) Trademark.
ANSWER-(b)
[28] Depreciation on asset is provided with the objective of
(a) To accumulate funds for the replacement of assets
(b) To ascertain true cost of production
(c) To present true and fair view of the financial position
(d) All of the above.
ANSWER-(d)
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