Tag: depreciation accounting

Questions Related to depreciation accounting

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
                                                                  --------------------