CA-CPT ACCOUNTS MCQ TEST QUESTIONS

Depreciation Accounting

1.Which of the following is Depleted ?

A) Land
B) Goodwill
C) Machinery
D) Coal Mines

2. Original cost = Rs. 1,00,000, Life = 5 years, Expected salvage value = Rs. 2,000. Rate of
depreciation p.a. =?

A) 19.6%
B) 20%
C) 19.8%
D) 20.8%

3.Amortization refers to writing off:

A) Depleting assets
B) Wasting assets
C) Intangible assets
D) Fictitious assets

4. Original cost of a machine = Rs. 1,30,000

Salvage value = Rs. 4,000
Useful life = Rs. 6 years
Depreciation for the 1st year under sum of year’s digit method will be :

A) Rs. 6,000
B) Rs. 12,000
C) Rs. 18,000
D) Rs. 36,000

5. The cost of a machine having a span of life of 5 years is Rs. 1,00,000 with a scrap value of
Rs. 10,000. The amount of depreciation under sum of years digit method for the second year
will be:

A) Rs. 16,000
B) Rs. 18,000
C) Rs. 12,000
D) Rs. 24,000
6. On 1st January, 2006 A Ltd. purchased a machine for Rs. 50,000 and spent Rs. 4000 on its
carriage and Rs. 2000 on its installation. Its useful life is 10 years and scrap value is Rs.
6,000. Depreciation for the year under fixed installment method will be :

A) Rs. 4,600
B) Rs. 5,000
C) Rs. 4,800
D) Rs. 4,500

7. A machinery is depreciated by Rs. 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

8. Obsolescence means decline in the value due to :

A) Fall in the market price

B) Physical wear and tear
C) Efflux of time
D) Innovations and inventions

9. Depreciation is the process of :

A) Asset Valuation
B) Verification of assets
C) Allocation of cost of assets to the period of its life
D) Decreasing the value of asset

10. Original cost of an asset Rs. 2,52,000, Salvage value Rs. 12,000. Depreciation for 2nd
year @ 10% p.a. under W.D.V method will be :

A) Rs. 21,600
B) Rs. 22,680
C) Rs. 30,000
D) Rs. 28,000

11. Under which Schedule is the depreciation rate mentioned ?

A) Schedule X
B) Schedule XII
C) Schedule XIV
D) Schedule XV
12.A machine of Rs. 3,000 was sold for Rs. 4,200. Depreciation provision to date was Rs.
400 and commission paid to selling agent was Rs. 420 and wages paid to workers for
removing the machine was Rs. 30. Profit on sale of machine will be:

A) Rs. 1,200
B) Rs. 1,000
C) Rs. 1,150
D) None of these

13. An asset was purchased for Rs. 12,500 and was depreciated under Reducing Balance
Method at the rate of 20% p.a. What is the value of the asset at the end of three years?

A) Rs. 8,000
B) Rs. 7,500
C) Rs. 6,400
D) Rs. 5,000

14. Cost of a machine = Rs. 1,12,500

Salvage value = Rs. 10,500
Useful Life = 5 years
Deprecation for the last year using the Sum of digits method will be:

A) Rs. 6,800
B) Rs. 20,400
C) Rs. 34,000
D) Rs. 27,200

15. 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 :

A) Profit Rs. 2,400

B) Profit Rs. 2,300
C) Loss Rs. 2,406
D) Loss Rs. 3,219

16. Amit Ltd. purchased a machine on 01.01.2003 for Rs. 1,20,000. Installation expenses
were Rs. 10,000. Residual value after 5 years Rs. 5,000. On 01.07.2003, expenses for repairs
were incurred to the extent of Rs. 2,000. Depreciation is provided @ 10% p.a. under written
down value method. Depreciation for the 4th year=_______.

A) 25000
B) 13000
C) 10500
D) 9477
17.The portion of the acquisition cost of the assets, yet to be allocated is known as

A) Written down value

B) Accumulated value
C) Realisable value
D) Salvage value

18. Obsolescence of a depreciable asset may be caused by

I. Technological changes.
II. Improvement in production method.
III. Change in market demand for the product or service output.
IV. Legal or other restrictions.

A) Only (I) above

B) Both (I) and (II) above
C) All (I), (II), (III) and (IV) above
D) Only (IV) above

19. If the rate of depreciation is same then the amount of depreciation under Straight Line
Method vis-a-vis Written Down Value Method will be:

A) Equal in all years

B) Equal in first year but higher in subsequent years.
C) Equal in the first year but lower in subsequent years.
D) Lower in the first year but equal in subsequent years

20. In the case of downward revaluation of an asset which is for the first time revalued, the
account to be debited is

A) Fixed asset
B) Revaluation Reserve
C) Profit & Loss account
D) General Reserve

21. Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for
the fourth year under sum of years digits method will be

A) 6000
B) 12000
C) 18000
D) 24000

22. Original cost = Rs. 1,26,000. Salvage value = 6,000. Depreciation for 2nd year @
10%p.a. under WDV method=
A) Rs.10,800
B) Rs.11,340
C) Rs.15,000
D) Rs.14,000

23. A machine is purchased for Rs. 1,00,000. Installation charges of Rs. 10,000 were
incurred. Depreciation @ 10% was provided on Straight Line Basis. The machine was sold
for Rs. 60,000 after 5 years. Calculate the profit or loss on sale of machine.

A) Rs. 5,000 Loss

B) Rs. 5,000 Profit
C) Rs. 60,000 Profit
D) Rs. 40,000 Loss

24. Original Cost = Rs. 1,00,000. Life = 5 years. Expected salvage value = Rs. 2,000.
Rate of depreciation p.a. = ________.

A) 20.0%
B) 19.8%
C) 19.6%
D) 19.4%

Q.25 A machine was purchased for Rs. 50,000. 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

A) Rs. 5,600
B) Rs. 4,800
C) Rs. 5,000
D) None

26. Which of the following is not true with regard to fixed assets?

A) They are acquired for using them in the conduct of business operations
B) They are not meant for resale to earn profit
C) They can easily be converted into cash
D) Depreciation at specified rates is to be charged on most of the fixed assets

27. A machinery is purchased for Rs. 10,000. On 1st April. 2005. Depreciation @ 10% p.a. is
provided. Calculate the amount of difference in depreciation as per SLM and WDV basis in
the year 2006-07.

A) Rs. 1,000
B) Rs. 100
C) Nil
D) Rs. 200

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

A) Plant & machinery

B) Land & building
C) Goodwill
D) Wasting assets like mines and quarries

29. Depletion method of depreciation is normally applied in case of __________assets.

A) Intangible
B) Tangible
C) Wasting
D) Current

Q.30 Original cost = Rs. 1,26,000. Salvage value = 6,000. Depreciation for 2nd year @ Units
of Production Method, if units produced in 2nd year was 5,000 and total estimated production
50,000.

A) Rs.10,800
B) Rs.11,340
C) Rs.12,600
D) Rs.12,000

Q.31 A new machine costing Rs. 1 lakh was purchased by a company to manufacture a
special product. Its useful life is estimated to be 5 years and scarp value at Rs. 10,000. The
production plan for the next 5 years using the above machine is as follows :
Year 1 5000 units
Year 2 10000 units
Year 3 12000 units
Year 3 12000 units
Year 4 20000 units
Year 5 25000 units
The depreciation expenditure for the 4th year under units of production method will be

A) Rs. 6,250
B) Rs. 12,500
C) Rs. 15,000
D) Rs. 25,000
Q.32 On 01.01.2001, a new plant was purchased by Mrs.ShwetaPeriwal for Rs. 1,00,000 and
a further sum of R.s 5,000 was spent on installation. On 01.06.2002, another plant was
acquired for Rs. 65,000. On 02.01.2003, the first plant was totally destroyed and the amount
of Rs. 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a
second hand plant was purchased for Rs. 75,000 and a further sum of Rs. 7,500 was spent for
repairs and Rs. 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been
provided @ 10% on the original cost annually on 31st December. It was the practice to
provide depreciation for full year on all acquisitions made at any time during the year and to
ignore the depreciation on any time sold during the year. In December 2003, it is decided to
change the method of depreciation and to follow the rate of 15% on diminishing balance
method with retrospective effect in respect of the existing items of plant and to make
necessary adjustments on 31.12.2003.
Depreciation over / under charged = __________.

A) Rs. 8,288 (under)

B) Rs. 8,288 (over)
C) Rs. 9,288 (under)
D) Rs. 9,288 (over)

Q.33 In the books of D Ltd. the machinery account shows a debit balance of Rs. 60,000 as on
April 1,2010. The machinery was sold on September 30, 2011 for Rs. 30,000. The company
charges depreciation @ 20% p.a. on diminishing balance method.
Depreciation for 2011-12 =

A) Rs.6,000
B) Rs.9,000
C) Rs.4,800
D) Rs.12,000

Q.34 On October 1, 2007 two machines costing Rs. 20,000 and Rs. 15,000 respectively, were
purchased.
On March 31, 2011, both the machines had to be discarded because of damage and had to be
replaced by two machines costing Rs. 25,000 and Rs. 20,000 respectively.
One of the discarded machines was sold for Rs.10,000 and against the other it was expected
that Rs.5,000 would be realized. The firm provides depreciation @ 15% on written down
value method.
Depreciation for the 2009-010 year =

A) Rs.2,625
B) Rs.4,856
C) Rs.4,128
D) Rs.3,509

Q.35 In the year 2004-2005, C Ltd. purchased a new machine and made the following
payments in relation to it:
 Rs.
Cost as per supplier’s list 5,20,000
4,70,000
Less: Agreed discount 50,000
10,000
Delivery charges
20,000
Erection charges
30,000
Annual maintenance charges
40,000
Additional components to increase capacity of the machine
5,000
Annual insurance premium

If depreciation is provided @ 10%p.a. WDV, depreciation for 3rd year is

A) Rs. 43,740
B) Rs. 44,145
C) Rs. 38,070
D) Rs.44,550

Q.36 Consider the following information:

I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs. 1,00,000.
III. Residual value of the asset at the end of useful life = Rs. 40,960.
The estimated useful life of the asset, in years, is

A) 4 years
B) 5 years
C) 6 years
D) 7 years

Q.37 A new machine costing Rs. 1 lakh was purchased by a company to manufacture a
special product. Its useful life is estimated to be 5 years and scarp value at Rs. 10,000. The
production plan for the next 5 years using the above machine is as follows :
Year 1 5000 units
Year 2 10000 units
Year 3 12000 units
Year 3 12000 units
Year 4 20000 units
Year 5 25000 units
The depreciation expenditure for the 2nd year under units of production method will be

A) Rs. 6,250
B) Rs. 12,500
C) Rs. 15,000
D) Rs. 25,000
Q.38 In the year 2004-2005, C Ltd. purchased a new machine and made the following
payments in relation to it:

Rs.
Cost as per supplier’s list 5,20,000
4,70,000
Less: Agreed discount 50,000
10,000
Delivery charges
20,000
Erection charges
30,000
Annual maintenance charges
40,000
Additional components to increase capacity of the machine
5,000
Annual insurance premium

The cost of the machine is

A) Rs. 5,40,000
B) Rs. 5,45,000
C) Rs. 4,70,000
D) Rs. 5,50,000
Q.39 On 01.01.2001, a new plant was purchased by Mrs.ShwetaPeriwal for Rs. 1,00,000 and
a further sum of R.s 5,000 was spent on installation. On 01.06.2002, another plant was
acquired for Rs. 65,000. On 02.01.2003, the first plant was totally destroyed and the amount
of Rs. 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a
second hand plant was purchased for Rs. 75,000 and a further sum of Rs. 7,500 was spent for
repairs and Rs. 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been
provided @ 10% on the original cost annually on 31st December. It was the practice to
provide depreciation for full year on all acquisitions made at any time during the year and to
ignore the depreciation on any time sold during the year. In December 2003, it is decided to
change the method of depreciation and to follow the rate of 15% on diminishing balance
method with retrospective effect in respect of the existing items of plant and to make
necessary adjustments on 31.12.2003.
Closing balance in Provision for Depreciation A/c = ___________

A) Rs. 30,788
B) Rs. 20,788
C) Rs. 25,788
D) Rs. 15,788

Q.40 H Ltd. purchased a machinery on April 01, 2000 for Rs. 3,00,000. It is estimated that
the machinery will have a useful life of 5 years after which it will have no salvage value. If
the company follows sum-of-the –years’-digits method of depreciation, the amount of
depreciation charged during the year 2004-05 was

A) Rs. 1,00,000
B) Rs. 80,000
C) Rs. 60,000
D) Rs. 20,000
Q.41 Consider the following information:
I. Rate of depreciation under the written down method = 20%.
II. Original cost of the asset = Rs. 1,00,000.
III. Residual value of the asset at the end of useful life = Rs. 40,960.
The estimated useful life of the asset, in years, is

A) 4 years
B) 5 years
C) 6 years
D) 7 years

Q.42 On October 1, 2007 two machines costing Rs. 20,000 and Rs. 15,000 respectively, were
purchased.
On March 31, 2011, both the machines had to be discarded because of damage and had to be
replaced by two machines costing Rs. 25,000 and Rs. 20,000 respectively.
One of the discarded machines was sold for Rs.10,000 and against the other it was expected
that Rs.5,000 would be realized. The firm provides depreciation @ 15% on written down
value method.
Depreciation for the 2009-010 year =

A) Rs.2,625
B) Rs.4,856
C) Rs.4,128
D) Rs.3,509

Q.43 Glass, Cutlery etc.: Balance on 01.01.2004 is Rs. 28,000. Glass, Cutlery, etc. purchased
during the year Rs. 16,000. Depreciation is to be charged on the above assets as follows-
1/5th of their values is to be written off in the year of purchase and 2/5th in each of the next 2
years. Of the stock of Glass, Cutlery, etc. as on 01.01.2004, ½ was one year old and ½ was 2
years old. Purchases are made on 1st January.
Closing Balance in Glass, Cutlery A/c = _________.

A) Rs. 18,000
B) Rs. 18,500
C) Rs. 19,800
D) Rs. 20,400

Q.44 A new machine costing Rs. 1 lakh was purchased by a company to manufacture a
special product. Its useful life is estimated to be 5 years and scarp value at Rs. 10,000. The
production plan for the next 5 years using the above machine is as follows :
Year 1 5000 units
Year 2 10000 units
Year 3 12000 units
Year 3 12000 units
Year 4 20000 units
Year 5 25000 units
The depreciation expenditure for the 4th year under units of production method will be

A) Rs. 6,250
B) Rs. 12,500
C) Rs. 15,000
D) Rs. 25,000

Q.45 On 01.01.2001, a new plant was purchased by Mrs.ShwetaPeriwal for Rs. 1,00,000 and
a further sum of R.s 5,000 was spent on installation. On 01.06.2002, another plant was
acquired for Rs. 65,000. On 02.01.2003, the first plant was totally destroyed and the amount
of Rs. 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a
second hand plant was purchased for Rs. 75,000 and a further sum of Rs. 7,500 was spent for
repairs and Rs. 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been
provided @ 10% on the original cost annually on 31st December. It was the practice to
provide depreciation for full year on all acquisitions made at any time during the year and to
ignore the depreciation on any time sold during the year. In December 2003, it is decided to
change the method of depreciation and to follow the rate of 15% on diminishing balance
method with retrospective effect in respect of the existing items of plant and to make
necessary adjustments on 31.12.2003.
Depreciation over / under charged = __________.

A) Rs. 8,288 (under)

B) Rs. 8,288 (over)
C) Rs. 9,288 (under)
D) Rs. 9,288 (over)

Q.46 Vijay Traders purchased Car on 1.4.08 for Rs. 3,00,000. They are charging depreciation
on written Down Value method. On 31.3.09 they sold the Car for Rs. 1,65,000 and incurred a
loss of Rs. 7,5000. The rate of depreciation p.a. is :-

A) 10%
B) 15%
C) 20%
D) 25%

Q.47 Amit Ltd. purchased a machine on 01.01.2003 for Rs. 1,20,000. Installation expenses
were Rs. 10,000. Residual value after 5 years Rs. 5,000. On 01.07.2003, expenses for repairs
were incurred to the extent of Rs. 2,000. Depreciation is provided under straight line method.
Depreciation rate = 10%. Annual Depreciation = _________.

A) 13000
B) 17000
C) 21000
D) 25000
Q.48 Which of the following statements is/are false?
I. The term ‘depreciation’, ‘depletion’ and ‘amortization’ convey the same meaning.
II. Provision for depreciation A/c is debited when provision for depreciation A/c is created.
III. The main purpose of charging the profit and loss A/c with the amount of depreciation is
to spread the cost of an asset over its useful life for the purpose of income determination.

A) Only (I) above

B) Only (II) above
C) Only (III) above
D) All (I), (II) and (III) above

Q.49 The number of production or similar units expected to be obtained from the use of an
asset by an enterprise is called as

A) Unit life
B) Useful life
C) Production life
D) Expected life

Q.50 Price of the computer = Rs. 50,000

Residual value = Rs. 10,000
Hours worked for the year = 6000 hrs.
Estimated life of computer = 20,000 hrs.
Calculate the amount of depreciation

A) Rs. 15,000
B) Rs. 12,000
C) Rs. 20,000
D) Rs. 24,000

Q.51 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

Q.52 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.
Q.53 Annuity method is designed for which of the following :

A) Leases
B) Intangibles
C) Fixed Assets
D) Any of above

Q.54 Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation
for the first year under sum of years digits method will be

A) Rs. 6,000
B) Rs. 12,000
C) Rs. 18,000
D) Rs. 36,000

Q.55 A machine was purchased on 1st April, 2007 for Rs. 5,00,000 and 1st October, 2007 for
Rs. 2,00,000. Calculate depreciation @ 20% p.a. on written down value method for the year
ending 31st March, 2008.

A) Rs. 1,00,000
B) Rs. 1,40,000
C) Rs. 40,000
D) Rs. 1,20,000

Q.56 Cost of machinery Rs. 2,52,000

Salvage value Rs. 12,000
Useful life 6 years
Annual depreciation under straight line method will be :

A) Rs. 42,000
B) Rs. 40,000
C) Rs. 15,000
D) Rs. 28000

Q.57 Which of the following is the meaning of entry stated in the machinery A/c
Dr. Machinery A/c (2008-09) Cr.
Date Particulars Amount Rs. Date Particulars Amount Rs.
31/03/09 To Depreciation A/c 4,000

A) Depreciation provided at the year endRs. 4,000.

B) Depreciation provided reversed to the extent of Rs. 4,000.
C) Machinery appreciated by Rs. 4,000.
D) None of the above.
Q.58 A mine was taken on lease for Rs. 2,00,00,000. Its total production capacity is
4,00,000mt. What will be the depreciation in 2007 if it produced 30,000 m.t. in 2007?

A) Rs. 10 lacs
B) Rs. 15 lacs
C) Rs. 50 lacs
D) None of these

Q.59___________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

Q.60 A purchased a mine for Rs. 2,50,000 minerals in the mine were expected to be 5,00,000
tonnes. In the first year, 50,000 tones of minerals were used. What is the depreciation for the
first year?

A) Rs. 20,000
B) Rs. 25,000
C) Rs. 30,000
D) Rs. 35,000