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Asset disposal account - class-XI

Description: asset disposal account
Number of Questions: 47
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Tags: accountancy depreciation accounting depreciation depreciation, provisions and reserves depreciation, provision and reserve
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When scrap is sold ________ account is credited.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Asset A/c

  2. Bank A/c

  3. Scrap A/c

  4. None of the Above.

Show answer
Correct Option: A
Explanation:

Scrap value is the estimated cost that a fixed asset can be sold for after providing in for full depreciation.  When an asset is purchased, asset account is debited as assets have debit balance. So when scrap is sold, asset account is credited with the amount received on sale. 

An item of fixed assets which has retired from active use and is held for disposal is ______________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. not shown in the financial statement

  2. shown at net book value

  3. shown at net realizable value

  4. shown at lower of net book value and net realizable value

Show answer
Correct Option: D
Explanation:

As the assets is already retired from active use, the valuation has to be shown on the basis of net book value or net realizable value whichever is lower. 

This is based on the concept of conservatism. 

Give journal entries for:
Transfer of balance in asset account in case of loss.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit and Loss A/c Dr.

    To Asset A/c

  2. Asset A/c Dr.

    To Profit and Loss A/c

  3. Bank A/c Dr.

    To Asset A/c

  4. None of the above

Show answer
Correct Option: A
Explanation:

If the asset is disposed off, the profit or loss generated on account of sale has to be transferred to the respective asset a/c. If the sale proceed is more than the written down value of the asset, there will be profit and if the sale proceed is lower than the written down value, there will be loss on sale of asset. 


For example , WDV of the machine is Rs.5000 which is sold for Rs.4500. There is a loss of Rs.500 on sale of asset. Following entry will be passed in the books of account for loss:

Profit & Loss A/c                            Dr.   500
Bank A/c                                         Dr. 4500
       To Asset A/c                                                5000

 Account appear under Use of Asset Disposal Account are ____________________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Original cost of the asset

  2. Sale price of the asset

  3. Value of the parts of the asset retained for use

  4. All of the above

Show answer
Correct Option: D
Explanation:

Option D is the correct one.

  1. No proceeds, fully depreciated. Debit all accumulated depreciation and credit the fixed asset.
  2. Loss on sale. Debit cash for the amount received, debit all accumulated depreciation, debit the loss on sale of asset account, and credit the fixed asset.
  3. Gain on sale.


Disposal of asset can be done________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. at the end of its useful life

  2. during its useful life due to obsolescence

  3. during its useful life due to abnormal factor

  4. all of the above

Show answer
Correct Option: D
Explanation:

An asset can be disposed off due to the following reasons:

  • at the end of its useful life
  • during its useful life due to obsolescence
  • during its useful lie due to abnormal factors like technological changes. 

The amount incurred on asset additions/extensions is _____.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Added to assets

  2. Deducted from assets

  3. Added to liabilities

  4. Deducted from liabilities

Show answer
Correct Option: A
Explanation:

Any addition done in fixed asset should be added to the asset a/c. Depreciation on addition has to be provided on pro-rata basis i.e. depending on the utilization of assets. For example, if an addition is done on 1st Oct 2017, than depreciation will be charged for 6 months only on the additions. 

What is debited in asset disposal account?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Market value of asset

  2. Accumulated depreciation

  3. Original cost of asset being sold

  4. Loss on sale

Show answer
Correct Option: C
Explanation:

Asset disposal account is prepaed to ascertain profit or loss, when the asset is sold or dicarded. Asset disposal account is debited with original cost of asset disposed off.

Additional asset is Depreciated from _______.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Beginning of the year

  2. Ending of the year

  3.  The addition made

  4.  The date addition proposed

Show answer
Correct Option: C
Explanation:

Depreciation is charged on the book value of the machine at the beginning of the year. If any new machinery purchased during the year, the depreciation is charged on pro rata basis for the months for which asset is used. 


For example, if a machine is purchased on 1/10/2017, than depreciation will be charged for 6 months i.e. from 1/10/2017 to 31/03/2018.

When a part of the asset is sold and provision for depreciation account exists, which new account is formed ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciation account

  2. Use of Asset Disposal Account

  3. provision for depreciation account

  4. Asset account

Show answer
Correct Option: B
Explanation:

Option B is the correct one.

A disposal account is a gain or loss account that appears in the income statement, and in which is recorded the difference between the disposal proceeds and the net carrying amount of the fixed asset being disposed of.

The balance of asset disposal account is transferred to __________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Trading account

  2. Profit and loss account

  3. Balance sheet

  4. None of the above

Show answer
Correct Option: B
Explanation:

Here the B option is right answer.

When the asset is sold at the end of its useful life, the sale proceeds should be credited the asset account. The profit or loss on sale or disposal of the assets is transferred to the P&L a/c.

What is credited in asset disposal account?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Accunulated depreciation 

  2. Original cost of the asset being sold

  3. Sale proceeds of the assets disposed off

  4. Both (a) and (c)

Show answer
Correct Option: D
Explanation:

Asset disposal account is prepaed to ascertain profit or loss, when the asset is sold or dicarded. Asset disposal account is credited with :

1. Accumulated depreciation
2. Sale proceeds of the asset disposed off.

Book value of machinery is Rs.1,00,000 .
Rate of depreciation is 10%
New addition to machinery was made on 1/10/2016 of Rs.5000
What will be the depreciation for year ending 31/3/2017?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.10500

  2. Rs.10000

  3. Rs.10250

  4. Rs.11000

Show answer
Correct Option: C
Explanation:

Book Value of Machinery is Rs.100000

Addition to Machinery on 1/10/2016 of Rs.5000
Rate of Depreciation is 10%

Depreciation will be calculated as:

Depreciation @10% on Rs.100000                       Rs.10000
Depreciation @10% on Rs.5000 for 6 months= 5000 *10% *6/12
                                                                               =Rs.250
Total Depreciation will be Rs.10000+Rs.250= Rs.10250

Book value of machinery is Rs.3,00,000 .
Rate of depreciation is 15%
New addition to machinery was made on 1/1/2015 of Rs.20000
What will be the depreciation for year ending 31/3/2015?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.46500

  2. Rs.45750

  3. Rs.45000

  4. Rs.50000

Show answer
Correct Option: B
Explanation:

Book Value of Machinery is Rs.300000

Addition to Machinery on 1/1/2015 for Rs.20000
Rate of Depreciation is 15%

Depreciation will be calculated as:

Depreciation @15% on Rs.300000                 Rs.45000
Depreciation @15% on Rs.20000 for 3 months =Rs.20000 *15% *3/12
                                                                               =Rs.750
Total Depreciation will be Rs.45000+Rs.750= Rs.45750

Book value of machinery is Rs.4,00,000 .
Rate of depreciation is 10%
New addition to machinery was made on 1/10/2016 of Rs.35000
What will be the additional depreciation for year ending 31/3/2017?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.41750

  2. Rs.1750

  3. Rs.43500

  4. Rs.3500

Show answer
Correct Option: B
Explanation:

Cost of Machinery is Rs.400000

Additional machinery purchased on 1/10/2016 is Rs.35000
Rate of depreciation is @10%

Depreciation @10% on the old machinery for 2016-17         Rs.40000
Additional depreciation @10% on Rs.35000 for 6 months: 
                                                =35000  *10% *6/12             = Rs.1750

Profit on sale of Asset is __________ to Profit and loss A/c.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Debited

  2. No Effect

  3. Credited

  4. None

Show answer
Correct Option: C
Explanation:

Following are the journal entries in respect of sale of fixed assets :

1. Cash/ Bank  A/c      Dr.
        To Asset A/c
(Being the asset sold)
2. Asset A/c                Dr. 
         To Profit & Loss A/c
(Being the transfer of profit on sale).

___________ is designed to provide a complete and clear view of all the transactions involved in the sale of asset under one account head.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Asset sale A/c

  2. Asset Clear A/c

  3. Asset Disposal A/c

  4. None

Show answer
Correct Option: C
Explanation:

Asset Disposal A/c.

Asset Disposal A/c is designed to provide a complete and clear view of all the transaction involved in gthe sale of asset unfer one acount head. The original cost of asset being sold is debited to the asset disposal account and accumulated depreciation amount appearing in provision for depreciation account relating to that asset till the date of disposal is credited to the asset disposal account. The net amount realised from the sale of the asset is also crerdited to this account. The balance of asset disposal account shows profit or loss which is transferred to profit and loss account. The advantage of this method is that it gives full picture of all the transactions related to asset disposal at one place.

________can take place either at the end of life of asset or during its useful life.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Purchase of asset

  2. Disposal of asset

  3. Collection of asset

  4. None of the Above.

Show answer
Correct Option: B
Explanation:

Asset disposal is the removal of a company's long term asset from the company's accounting records. It is an important concept because it primarily relates to company's capital assets. A depreciable asset can be disposed off or sold either at the end of its useful life or during its useful life. Disposal of asset may be during its useful life due to obsolescence or other factors. 

Original cost - 2,50,000, Accumulated Deprecation - 50,000, Sale Price - 2,00,000
calculate resulting profit and loss.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Loss 50,000

  2. Profit 50,000

  3. Loss 15000

  4. No Profit No Loss

Show answer
Correct Option: D
Explanation:

Solution to the given problem is as under:


Original Cost                                              Rs.250000
Less: Accumulated depreciation              Rs. 50000
                                                                  -------------------
Written down value of the asset               Rs.200000
Less: Sale Price                                          Rs.200000
                                                                  -------------------
Profit/Loss on sale of asset                          Rs. NIL
                                                                  --------------------

Loss on sale of asset is ___________ to profit and loss A/c.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Debited

  2. Credited

  3. No Effect

  4. None

Show answer
Correct Option: A
Explanation:

Following are the journal entries in respect of sale of fixed assets :

1. Cash/ Bank  A/c      Dr.
        To Asset A/c
(Being the asset sold)
2. Profit & Loss A/c   Dr. 
        To Asset A/c
(Being the transfer of loss on sales).

Original cost - 100000, Accumulated Deprecation - 80000, Sale Price - 15000
calculate resulting profit and loss.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Loss 20,000

  2. Profit 20,000

  3. Loss 5000

  4. Profit 5000

Show answer
Correct Option: C
Explanation:

Solution to the given problem is as under:


Original Cost                                              Rs.100000
Less: Accumulated depreciation              Rs. 80000
                                                                  -------------------
Written down value of the asset               Rs.20000
Less: Sale Price                                          Rs. 15000
                                                                  -------------------
Loss on sale of asset                                 Rs. 5000
                                                                  --------------------

During sale of Asset the accumulated Depreciation in Provision Account is transferred to _______.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Liabilities Account

  2. Asset Account

  3. Expense A/c

  4. Income A/c

Show answer
Correct Option: B
Explanation:

Option B is correct. . When depreciation charged is not deducted from assets it is recorded in a separate account named provision for depreciation account. The asset account appears in its book at its original value. At the time of sale of asset, accumulated depreciation from this account is transferred to asset account. 

While charging depreciation during sale of asset, ________ is Credited.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Asset A/c

  2. Depreciation A/c

  3. Profit and loss A/c

  4. None

Show answer
Correct Option: A
Explanation:

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c     Dr.
        To Asset A/c 
(Being depreciation chargedd to asset)
2. Profit and loss A/c  Dr.
         To Depreciation A/c 
(Being depreciation expense transferred to P&L A/c).

Any addition or extension to asset must be ________ its useful life of that asset.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciated

  2. Appreciated

  3. Ignored

  4. Separated

Show answer
Correct Option: A
Explanation:

Option A is the Correct one.

Depreciation is must on every Fixed assets and on its addition or extension 
for that there are three basic condition.
1.The Assets must be Fixed Tangible Assets
2.The Assets must be used for Business Purpose

3.The must have limited life
Note :- Land has not limited or specific life therefore we can't calculate depreciation on Land.

The amount of depreciation charged on machinery is debited to ________ account.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciation

  2. Machinery

  3. Provision of Depreciation

  4. Fixed Asset

Show answer
Correct Option: A
Explanation:

Depreciation is charged on a certain percentage on each of the asset every year. Depreciation is an indirect cost for which the following entry will be passed:


Depreciation A/c                            Dr.
     To Asset A/c 

Later on, depreciation a/c will be transferred to profit & loss a/c. 

The Profit on Sale of an asset is debited to ________ Account.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit and Loss

  2. Reserve

  3. Asset

  4. Balance Sheet

Show answer
Correct Option: C
Explanation:

On sale of any asset, there must be some profit/loss as the amount realized on sale may be more or less compared to the written down value. If the sale proceed is more than the written down value, there will be a profit and if the sale proceed is less than the written down value, there will be a loss. 


Profit on sale of asset is debited to asset and credited to profit & loss a/c. 

Revaluation of assets is carried out through _________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. profit and loss A/c

  2. profit and loss adjustment A/c

  3. profit and loss appropriation A/c

  4. general reserve A/c

Show answer
Correct Option: A
Explanation:

b'whenever a partner exits a partnership, the books of accounts of such a firm have to be settled. the outgoing partner or his legal representative have to be paid their dues. so that revaluation of assets is carried out through profit and loss account.'

Loss on disposal of assets is credited to _____________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Depreciation a/c

  2. Assets a/c

  3. Loss on sale of assets a/c

  4. Profit and loss a/c

Show answer
Correct Option: B
Explanation:

The disposal of assets involves eliminating assets from the accounting records. This is needed to completely remove all traces of an assets from the balance sheet. An asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs. The journal entry recorded as Debit cash for the  amount received , debit all accumulated depreciation, debit  the loss on sale of asset account, and credit the fixed asset.

A purchased a machine for Rs. $200,000$ and incurred Rs. $5000$ on its installation and commissioning. After $3$ yrs it is sold for Rs. $100,000$ resulting into a loss of Rs. $44,850$. The book value of the machine on the date of sale is ___________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs. $200000$

  2. Rs. $205000$

  3. Rs. $144850$

  4. Rs. $139850$

Show answer
Correct Option: C
Explanation:

Book value of the asset on the date of sale = Selling cost of asset + Loss on sale of assets

Book value of the asset on the date of sale = Rs. 1,00,000 + Rs. 44,850 = Rs. Rs. 1,44,850

If a concern proposes to discontinue its business from March 2015 and decides to dispose of all its assets within a period of $4$ months, the Balance Sheet as on March 31, 2015 should indicate the assets at their ______.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Historical cost

  2. Net realizable value

  3. Cost less depreciation

  4. Cost price or market value, whichever is lower

Show answer
Correct Option: B

B Ltd acquired a machine on 1st January, 2010 at a cost of Rs. $14,000$ and spent Rs. $1,000$ on its installation. The firm writes off depreciation at $10$% p.a. of the original cost every year. The books are closed on 31st December every year. After 3 years machine sold for Rs. $13,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $2,500$

  2. Loss - Rs. $2,500$

  3. Profit - Rs. $2,200$

  4. Loss - Rs. $2,200$

Show answer
Correct Option: A

A Ltd. acquired a machine on 1st January, 2010 at a cost of Rs. $14,000$ and spent Rs. $1,000$ on its installation. The firm writes off depreciation at $10$% p.a. of the original cost every year. The books are closed on 31st December every year. After 3 years machine sold for Rs. $9,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit-Rs. $1,500$

  2. Loss- Rs. $1,500$

  3. Profit - Rs. $800$

  4. Loss - Rs. $800$

Show answer
Correct Option: B

Loss on machine sold on 1.10.2002 in year 2002-2003 will be -

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs. $16,560$

  2. Rs. $3,240$

  3. Rs. $11,200$

  4. Rs. $7900$

Show answer
Correct Option: A

T Ltd. acquired a machine on 1st January, 2010 at a cost of Rs. $1,40,000$ and spent Rs. $10,000$ on its installation. The firm writes off depreciation at $15$% p.a on WDV. The books are closed on 31st December every year. After 3 years machine sold for Rs. $87,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $1,023$

  2. Loss - Rs. $1,023$

  3. Profit - Rs. $5,119$

  4. Loss - Rs. $5,119$

Show answer
Correct Option: D

S Ltd acquired a machine on 1st January, 2010 at a cost of Rs. $1,40,000$ and spent Rs. $10,000$ on its installation. The firm writes off depreciation at $15$% p.a on WDV. The books are closed on 31st December every year. After 3 years machine sold for Rs. $97,000$. Profit/Loss on sale = ? 

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $4,881$

  2. Loss - Rs. $4,881$

  3. Profit - Rs. $11,023$

  4. Loss - Rs. $11,023$

Show answer
Correct Option: A

V Ltd acquired machine on 1st July, 2010 at a cost of Rs. $15,000$. The firm writes off depreciation at $10$% pa.a on WDV. The books are closed on 31st March every year. On 30th June  2013 machine sold for Rs. $8,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $2,958$

  2. Loss - Rs. $2,958$

  3. Profit - Rs. $3,375$

  4. Loss - Rs. $3,375$

Show answer
Correct Option: B

C Ltd. acquired a machine on 1st January, 2010 at a cost of Rs. $14,000$ and spend Rs. $1,000$ on its installation. The firm writes off depreciation at $10$% p.a of the original cost every year. The books are closed on 31st December every year. On 31st May 2013 machine sold for Rs. $8,000$. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit - Rs. $2,275$

  2. Loss - Rs. $2,275$

  3. Profit - Rs. $1,875$

  4. Loss - Rs. $1,875$

Show answer
Correct Option: D

In an enterprise some tools were purchased worth Rs.2000 and later after 5 months additional tools worth Rs.4000 were purchased. It was presumed that the value of the total tools at the end of the year will be Rs.2000. What will be the depreciable value?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. 4000

  2. Nil

  3. 2000

  4. 6000

Show answer
Correct Option: A

A purchased an old computer costing $Rs. 10,000$ and incurred $Rs. 1,000$ on its repair and $Rs. 500$ on its packing. He sold the computer at $20$% margin on selling price. The sales value will be _________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. $Rs. 12,500$

  2. $Rs. 11,000$

  3. $Rs. 14,375$

  4. $Rs. 13,800$

Show answer
Correct Option: C
Explanation:

Total cost of Computer = 10,000 + 1,000 + 500 = 11,500.


    Cost     80             
+ Profit     20    
 ___  _
   Sales     100  

Hence, sales value = 11,500 X 100 / 80 = 14,375.

On the basis of following information answer the following question.

The balance in accumulated depreciation account of a company at the beginning of year $2008 - 2009$ was Rs$2,00,000$ when the original cost of the assets amounted to Rs$10,00,000$. The company charges $10\%$ depreciation on a SLM basis for all assets including those which have been either purchased or sold during the year. One such asset costing Rs.$5,00,000$ which accumulated depreciation as at the beginning of the year of Rs$80,000$ was disposed off during the year.

Depreciation from the current year = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs$40,000$

  2. Rs$50,000$

  3. Rs$60,000$

  4. Rs$1,00,000$

Show answer
Correct Option: D
Explanation:
Depreciation for the current year = Opening balance x rate 
                                                        = RS-10,00,000 x 10/100
                                                        = RS-1,00,000.


                     

In the books of SZ Ltd. the machinery account shows a debit balance of Rs. 60,000 as on 1.4.2015. The machinery was sold on 30.9.2016 for 30,000. The company charges depreciation @ 20 % p.a on diminishing balance method. Profit/Loss on sale = ?

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs$13,200$ Profit

  2. Rs$13,200$ Loss

  3. Rs$6,800$ Profit

  4. Rs$6,800$ Loss

Show answer
Correct Option: B
Explanation:

Profit.

A trader purchased a machinery for Rs.10,000 in jan 2004, Depreciation is charged @ 25% diminishing balance. At the end of third year it was sold for Rs.1,000. Profit or Loss on sale of machine will be:

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Profit Rs. 2,400

  2. Profit Rs. 2,300

  3. Loss Rs. 2,406

  4. Loss Rs.. 3219

Show answer
Correct Option: D
Explanation:
Profit/loss on sale of asset = sale value - WDV of the asset
                                             = 1,000 - 4,219
                                             = Loss of 3,219
                    
Working notes:- 
Depreciation for 1st year :-
= cost of the machine x rate of machinery
= 10,000 x 25/100
= RS- 2,500
Depreciation for 2nd year :-
= (10,000 - 2,500) 7,500 x 25/100
= RS-1,875.
Depreciation for the 3rd year :-
= (7,500 - 1,875) 5,625 x 25/100
= RS-1,406.

WDV of asset at the end of the 3rd year :-
= 10,000 - (2,500 + 1,875 + 1,406) 
= RS-4,219.

A machine was purchased for Rs. 5,000 installation expenses amounted to Rs. 2,000 wages of Rs. 4,000 were paid on installation. The scrap value at the end of its useful life of 10 years is Rs. 6,000. Repairs of Rs. 6,000 was made after 6 months from the date of purchase. Calculate depreciation.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs. 5,600

  2. Rs. 4,800

  3. Rs. 5,000

  4. None

Show answer
Correct Option: C

Unabsorbed scientific research Rs.$7,65,000$ (revenue nature Rs.$1,65,000$) can be carried forward for a maximum period of:

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. $6$ years

  2. $5$ years

  3. $4$ years

  4. $2$ years

Show answer
Correct Option: C
Explanation:
While computing the income chargeable to tax under the head "profits and gains from business or profession" the person is allowed to claim the following deductions apart from the other several deductions:

  • Depreciation 
  • Capital Expenditure on account of scientific research
  • Capital expenditure for promoting family planning

If the income for the current year falls short to absorb the above deductions, balance amount on account of unabsorbed depreciation, unabsorbed amount of scientific research and unabsorbed family expenses need to be carried forward in the next years.

 Business losses can be carried forward for a period of 8 years.  But the unabsored amount of scientific research can be carried forward for a maximum period of 4 years only.

A purchased an old computer costing Rs. $10,000$ and incurred Rs. $1,000$ on its repair and Rs. $500$ on its packing. He sold the computer at $20\%$ margin on selling price. The sales value will be _________________.

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs. $12,500$

  2. Rs. $11,000$

  3. Rs. $14,375$

  4. Rs. $13,800$

Show answer
Correct Option: C
Explanation:

Gross Margin is 20% on Selling Price

If Selling Price is 100
Than cost will be 80% of the selling price
that means Margin on cost becomes 20/80 i.e. 25% on cost

Computer Costing        Rs.10000
Repairs                          Rs. 1000
Packing                         Rs.  500
                                       -------------
Total Cost                      Rs.11500
Margin @25%                Rs. 2875
                                     -------------
Selling Price                  Rs.14375
                                      --------------

On the basis of the information given below, answer the given question.

A firm, which depreciates its machinery at $10\%$ p.a on WDV method, had on $1st$ April, $2002$, Rs$9,72,000$ in the debit of machinery account. During the year ended $31st$ March, $2003$, a part of the machinery purchased on $1st$ April, $2000$ for $Rs.80,000$ was sold for Rs.$45,000$ on $1st$ October, $2002$ and a new machinery at a cost of Rs.$1,50,000$ was purchased and installed on the same date, installation charges being Rs.$8,000$. On $31st$ March, $2003$, the firm decided to change its method of charging depreciation from WDV method to SLM with effect from April, $2000$, the rate of depreciation remaining the same as before.

Depreciation on machine sold upto $1.10.2002$ in year $2002 - 2003$ will be-

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.$16,560$

  2. Rs.$3,240$

  3. Rs.$11,200$

  4. Rs.$7,900$

Show answer
Correct Option: B

On the basis of the information given below, answer the given question.

A firm, which depreciates its machinery at $10\%$ p.a on WDV method, had on $1st$ April, $2002$, Rs$9,72,000$ in the debit of machinery account. During the year ended $31st$ March, $2003$, a part of the machinery purchased on $1st$ April, $2000$ for $Rs.80,000$ was sold for Rs.$45,000$ on $1st$ October, $2002$ and a new machinery at a cost of Rs.$1,50,000$ was purchased and installed on the same date, installation charges being Rs.$8,000$. On $31st$ March, $2003$, the firm decided to change its method of charging depreciation from WDV method to SLM with effect from April, $2000$, the rate of depreciation remaining the same as before.

Extra depreciation due to change in method will be-

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.$16,560$

  2. Rs.$3,240$

  3. Rs.$11,200$

  4. Rs.$7,900$

Show answer
Correct Option: C

On the basis of the information given below, answer the given question.

A firm, which depreciates its machinery at $10\%$ p.a on WDV method, had on $1st$ April, $2002$, Rs$9,72,000$ in the debit of machinery account. During the year ended $31st$ March, $2003$, a part of the machinery purchased on $1st$ April, $2000$ for $Rs.80,000$ was sold for Rs.$45,000$ on $1st$ October, $2002$ and a new machinery at a cost of Rs.$1,50,000$ was purchased and installed on the same date, installation charges being Rs.$8,000$. On $31st$ March, $2003$, the firm decided to change its method of charging depreciation from WDV method to SLM with effect from April, $2000$, the rate of depreciation remaining the same as before.

Closing balance of machinery account will be-

accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

  1. Rs.$9,61,800$

  2. Rs.$9,45,240$

  3. Rs.$9,42,000$

  4. Rs.$9,34,100$

Show answer
Correct Option: D
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