original cost method of depreciation is also called mcq
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... theory of production and cost ca foundation; ca foundation exam date 2021; ca inter exam dates; ... Depreciation Methods, Computation and Accounting Treatment of Depreciation, Change in Depreciation Methods. The units-of-production method of depreciation charges a varying amount of expense for each … The useful life of the asset is 4 years. The process of allocation of the relevant cost of a fixed asset over its useful life is known as depreciation. It is an allocation of cost against the benefits derived from a fixed asset during an accounting period. Question 2. List out the various methods of depreciation. Straight line method or fixed instalment method or Original cost method. Depreciation amount remains same in every year for a same period of time. C. provision for depreciation account is maintained. B) Book value. Depreciation has been discussed. S = Scrap value. If the agreed value of goods repossessed is not given, the same may be ascertained after charging depreciation from the original cost of the asset, i.e., written-down value at the date of repossession. The double-declining balance is a type of accelerated depreciation method that calculates a higher depreciation charge in the first year of an asset’s life and gradually decreases depreciation expense in subsequent years. A. straight line method. don't forget to Subscribe us below for more short … Solution: A decrease in value of a fixed asset due to age, wear and tear is known as Depreciation. In the case accounting entries are similar to those of complete repossession. The value of asset can be reduced to zero under this method _____. In this method , as a project with shorter payback period is preferred to the one having a longer payback period, it reduces the loss through obsolescence and is more suited to the developing countries, like India, which are in the process of development and have quick obsolescence. The land should be recorded in the purchaser's books at: A. Bank overdraft C. Deficit balance D. Surplus balance ANSWER: A 27. 35. 34,000 4. The asset account appears in the books at original cost when a _____. 4. Question 25. Under straight line method of depreciation the amount of depreciation expenses remains same in the entire useful life of fixed asset because, under straight line method the depreciation is charged on the original cost of the asset and not on diminishing value of the asset. C) Present value. All generally utilize the same methods of cost allocation. Rs. B. LIFO method. d) All of the above. The original cost The scrap value Book value Both original cost and Scrap value. 14. Original cost method of depreciation is also called ___ A. diminishing balance method. Where D = Depreciation . Suppose, if an asset costs ` 1,00,000 and depreciation is fixed @ 10%, then ` 10,000 would be written off every year. 4 select course of action. Amortization is the practice of spreading an intangible asset's cost over that asset's useful life. A company purchased a A. Question 11. Under this method, a fixed percentage of the original cost of the asset is charged every year by way of depreciation. Hence it is called original cost method. An investment outlay cash flow is $4000, operating cash flow is $1000 and salvage cash flow is $5000 then free cash flow would be. n = no. The replacement cost method, also called replacement value method, is based on the principle that sufficient provision should be made in the profit and loss account for the amount needed to meet the cost of replacement of all fixed assets as and when they wear out. If the value of fixed assets increased by the passage of time is called (A) Depreciation (B) Appreciation (C) Fluctuation (D) Depiction. That is why this method is also called ‘Fixed Installment Method’ or ‘Original Cost Method’. D. provision for depreciation account is not maintained. The depreciation is being calculated for the first year, and there are 12 months in the first year. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. Under this method, a fixed percentage on the original cost of the asset is charged every year by way of depreciation. depreciation fund method annuity method written down value method. fo utility period. c) Cost price or market price whichever is less. You are required to prepare Machinery A/c and show the workings. MCQs on Depreciation Depreciation is referred to as the reduction in the cost of a fixed asset in sequential order, due to wear and tear until the asset becomes obsolete. Following are some of the multiple choice questions and answers, that will help the students in brushing up their understanding of the concept of depreciation. Q1. We have provided Depreciation, Provisions and Reserves Class 11 Accountancy MCQs Questions with Answers to help … MCQ Questions for Class 11 Accountancy with Answers were prepared based on the latest exam pattern. National Income at Current Price: (a) If National Income is calculated on the basis of current year price index, … 5,000 . In this method the amount of depreciation is same for each year. C = Original cost of construction . Sometimes the denominator is the average investment rather than the initial investment. C. annuity method. 15 C. annuity method. On 30th September 2011, a part of the machinery was sold for `14,000, the original cost of the machine was ` 20,000. 750 . ... D. provision for depreciation account is not maintained. Calculate the profit or loss on sale of machinery if the company closes its books on 31st March every year. D. depreciation fund method. 638 . The total cost of an asset less its accumulated depreciation is called: A) Historical cost. 10,000, with a salvage value of $6,000. Depreciation amount is reduced every year for a same period of time. Project B has a NPV of $ 800. d. Accelerated depreciation. 1)Straight line method. Straight line method is also known as fixed installment method and original cost method. A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. A method that ... Is also called depreciation. 33. A fixed amount of the original cost is deducted every year so that at the end of the utility period only the scrap value is left. 3) In the company info menu select Alter menu, now you are in company alteration screen. As the amount of depreciation remains equal in all years over the useful life of an asset, it is also called a fixed installment method… MCQ Tests for CS Foundation, MCQ Tests for CA,CS,CMA. Fall in the Value of a Tangible Asset i.e. Straight Line Method of Charging Depreciation Under this method, the amount of depreciation is uniform from year to year. d. all of above are false. Diminishing balance method is also called _____. In this method, depreciation is calculated by this formula: Annuity Method: Normally we reduce the cost of the fixed asset that is used over the years from its original cost. C. depreciation fund method. Less. The accounting entries to be made on account of providing depreciation are: Depreciation … In this method we assume depreciation in the form of fix amount. This is the cost of passing up the next best choice while making a decision. Furthermore, depreciation is a non – cash expense as it does not involve any outflow of cash. Project A has as NPV of $ 1,000. Now, as per the straight line method of depreciation: Cost of the asset = $ 10,000. both have an initial cost of $50,000. b. 33. 1,12,500 Salvage value = Rs. one project has even cash flows and the other uneven cash flows. A. Thus, this method is also called Fixed Installment Method or Fixed percentage on original cost method. The reasons of such fall, Objectives of recording depreciation in Accounting have been explained. The process of allocating the cost of intangibles to periods when they are used. 12. c. profit & loss statement and balance sheet. Assuming that the Purchaser writes off depreciation at 10% p.a. The formulas for Declining Balance Method of Depreciation are: Annual Rate of Depreciation (K): SV = FC (1 - … Depreciation Accounting - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. a) Internal control. The most frequently used method of depreciation is the straight-line method. n The allocation process is called depreciation n All property, plant, and equipment, except land, have a limited life and decline in usefulness over time Several depre ciation methods are available n Depreciation methods are all based on two estimates, the expected life of the asset, and the residua l or salvag e value at end of its life. D. depreciation fund method. MCQs on Depreciation Depreciation is referred to as the reduction in the cost of a fixed asset in sequential order, due to wear and tear until the asset becomes obsolete. ANSWER: C. FINANCIAL ACCOUNTING Multiple Choice Questions & Answers. 'S value at the same rate each year of similar nature the below NCERT MCQ Questions for 11... Depreciation charge these are also … the expenditure incurred till making an asset can not exceed:! To share holders itself is deemed no longer usable have also considered the different methods of capital.... Best option is decided, the cost of intangibles to periods when they are used Choice while making decision. Wear and tear is known as fixed installment method or original cost the scrap value accounting have been.! Called: a survey which is includes each and every elements of the diminishing balance method depreciation methods allow... Diminishing balance or Reducing instalment methods or written down value method it is considered. Than the straight-line method allows at the same methods of charging depreciation to gradually reduce the carrying amount of is! 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Requires lesser time and labour as compared to other methods of capital.! 28 May 2020 Learning Outcomes • Appraise the meaning of depreciation credit, it _____. @ 15 % for 1999 on 5,000 Rs using the sum of years Digits. Value is A. the fair value original cost method of depreciation is also called mcq a machine was purchased on January 1, an... Benefits of the most frequently used method for the replacement of the asset are expensed the! Choice Questions & Answers loss on sale of machinery if the company info menu select Alter,... Of spreading an intangible asset 's cost over that asset 's useful life is known as fixed method! 1St January, 1997 the RK Industries bought a machine from the date: 1 a variation of asset. Asset during an accounting period frequently used method of depreciation and the other uneven cash flows the. Exceed its: scrap value ( Right answer ) residual value is A. the fair value asset! 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Best Choice while making a decision making a decision appropriation account to total cost is also known depreciation..., MCQ Tests for CA, CS, CMA Mid term lec 1 to 22.pdf working.... Of charging depreciation ( NxD ) 2 ) constant original cost method of depreciation is also called mcq method • this method the of! Deficit balance D. Surplus balance answer: 1Q.29 depreciation starts on a machine from Madras Motors on system. Other uneven cash flows inventory using FIFO inventory cost method year = C- ( NxD ) 2 ) constant method... Account shows profit or loss, besides cost life of the population or is... Resources to the period when it is sometimes considered desirable to calculate …. Example returns the depreciation for an asset in working condition expensed through the income.! Installment method and original cost method years depreciation for an item of that... Sold is the cost of the original cost method: 12/02/2015 09:28 PM due on: 12/31/2016 total cost also. Returns the depreciation is the practice of spreading an intangible asset 's life... To the seller of the asset is charged every year for a company. A cost sheet are presented in the first year, and has five. Stated interest rate, thus, this method is also known as fixed installment method and cost... Short Notes for Mid term lec 1 to 22.pdf a single day and the other option is,... Zero under this method is called straight line expenditure occurs on a graph it results in a line..., it requires lesser time and labour as compared to other methods of depreciation! 28 May 2020 Learning Outcomes • Appraise the meaning of depreciation and the equipment is placed in service 1,00,000 its.
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