Course:
CMA Foundation
1) Original cost = Rs. 12,60,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first
year under sum of years digits method will be:
(a)3,60,000 (b)1,20,000 (c)1,80,000
2) Obsolescence of a depreciable asset may be caused by:
1) Technological changes.
2) Improvement in production method.
3) Change in market demand for the product or service output.
4) Legal or other restrictions.
(a) Only 1) above (b) Both 1) and 2) above (c) All 1), 2), 3) and 4) above
3) The number of productions of 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
4) If a concern proposes to discontinue its business from March 2015 and decides to dispose of all
its plants within a period of 4 months, the Balance Sheet as on March 31, 2015 should indicate the
plants at their:
(a) Historical cost (b) Net realizable value (c) Cost less depreciation
5) In the case of downward revaluation of a plant which is for the first time revalued, the account
to be debited is:
(a) Plant account (b) Revaluation Reserve (c) Profit & Loss A/c
6) The portion of the acquisition cost of the tangible asset, yet to be allocated is known as:
(a) Written down value (b) Accumulated value (c) Realizable value
7) The main objective of providing depreciation is to:
(a) Create Secret Reserve (b) Reduce the book value of assets (c) Allocate cost of the assets
8) Original cost of a machine was Rs. 25,20,000 salvage value was Rs. 1,20,000, useful life was 6 years. Annual depreciation under Straight Line Method:
(a) Rs. 4,20,000 (b) Rs. 4,00,000 (c) Rs. 3,00,000
9) The cost of a machine is Rs. 20,00,000. Two years later the book value is Rs. 10,00,000. The
Straight-line percentage depreciation is:
(a) 50% (b) 33% (c) 25%
10) A machinery with original cost of Rs. 10,00,000 and Nil Salvage value acquired on 1st April 2017
with 4 years useful life was depreciated using Straight Line Method. It was decided to sell the
machinery on 1st October 2020 for Rs. 1,20,000. What shall be the gain or (loss) on the sale of
Machinery?
(a) Loss of Rs. 1,30,000 (b) Gain of Rs. 1,20,000
(c) Gain of Rs. 5,000 (d) Loss of Rs. 5,000
11) Which of the following assets does not depreciate?
(a) Machinery and equipment (b) Patents (c) Land
12) A company purchased a machinery on April 01, 2014, for Rs. 15,00,000. It is estimated that the
machinery will have a useful life of 5 years after which it will have no salvage value. The
depreciation charged during the year 2018-19 was:
(a) 5,00,000 (b) 4,00,000 (c) 3,00,000
13) If the equipment account has a balance of Rs. 22,50,000 and the accumulated depreciation
account has a balance of Rs. 14,00,000, the book value of the equipment is:
(a) 36,50,000 (b) 8,50,000 (c) 14,00,000
14) A plant with original cost of Rs. 50,00,000 was revalued after 2 years resulting in credit to
Revaluation Surplus account of Rs. 4,00,000. Towards the year end of 2019-20, due to COVID-19
the plan value had gone down by Rs. 5,00,000 and accordingly management decided to revalue
the same. What shall be the impact of this downwards revaluation on the Profit & Loss Account?
(a) Debit of Rs. 5,00,000 (b) Debit of Rs. 1,00,000
(c) Credit of Rs. 5,00,000 (d) Credit of Rs. 1,00,000
15) Depreciation refers to the process of –
(a) Asset valuation
(b) Allocation of cost of the assets over the period of its life
(c) Verification of assets
(d) Increasing or decreasing the value of asset
16) In case the depreciable assets are revalued, the provision for depreciation is based on –
(a) Market value of the assets
(b) Historical cost of assets
(b) Depreciated value of the assets
(d) The revalued amount over the estimate of the remaining useful life of such asset
17) Which of the following is the internal causes for depreciation?
(a) Wear and tear (b) Depletion or exhaustion (c) Both A & B
18) Which are the methods of depreciation prescribed by the Income Tax Act-
(a) Straight line and annuity method
(b) Sinking fund and Double declining method
(c) Equal installment and written down value method
(d) Production hour and sum of year’s digit method
19) Depreciation is not provided for which of the following asset?
(a) Goodwill (b) Land (c) Inventory of goods (d) Both B & C
20) Obsolescence means decline in the value due to:
(a) Physical wear and tear (b) Efflux of time
(c) fall in market price (d) Innovations and inventions
21) The depreciation account is closed at the end of the year by transfer to the:-
(a) General Reserve A/c (b) Profit and loss A/c
(c) Provision for depreciation A/c (d) Fixed asset A/c
22) Which of the following is an external cause for depreciation?
(a) Obsolescence (b) Time Element
(c) Abnormal Occurrences (d) All of the above
23) Accumulated depreciation is an example of:
(a) A liability (b) An expense
(c) An income (d) An unrecorded revenue
24) Purchase price of machine 8,90,000, freight and cartage 7000, installation charges 30,000,
Insurance charges 20,000, residual value is 40,000, estimated useful life 5 years. Calculate the
amount of annual depreciation under straight line method?
(a) 1,77,400 (b) 1,81,400 (c) 1,97,400 (d) 1,77,900
25) Depreciation of a ten-year lease is best done on the method:
(a) WDV (b) SLM (c) Annuity method (d) both a & b
26) Original cost is Rs. 1,50,000 residual value is 10,000, depreciation for 3rd year @ 10% p.a. under
WDV method_____.
(a) 14,000 (b) 12,150 (c) 11,340 (d) 12,240
27) 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
28) The value of an asset after deducting depreciation from the historical cost is known as:
(a) Fair value (b) Market Value (c) Net Realizable Value (d) Book Value
29) If the original cost of the machine = 1,00,000, life = 5 years residual value = 2,000. If the
depreciation for 4th year as per SLM is 19,600, then the rate of depreciation p.a. is:
(a) 10% (b) 15% (c) 20% (d) 5%
30) On purchase of second hand car for Rs. 10,000, the amount of Rs. 1,000 is spent on its repairs, Rs.
500 is incurred to get the car registered in own name and Rs. 1,200 is given as dealer’s commission.
The amount debited to car account should be –
(a) Rs.10,000 (b) Rs.10,500 (c) Rs.11,500 (d) Rs.12,700
31) A machine was purchased on 1-1-2006. It was delivered on 1-4-2006. The installation was
completed on 1-7-2006. The trial run was completed on 30-9-2006 and was made available for use
on 1-10-2006. The actual utilization started from 1-12-2006. The effective period -for calculation
of depreciation for the calendar year 2006 is –
(a) 10 months (b) 9 months (c) 1 month (d) 3 months
32) Kanda Trading Co. Bhindi Bazaar purchased a machinery for Rs.55,000 on 1st January 2005 and
spent Rs.5,000 for its erection, Rs.2,000 have to be paid for freight charges but Kanda Trading
Company made the settlement in Rs.1,800 only. What is the Cost of machinery –
(a) 60,000 (b) 61,800 (c) Rs.62,000 (d) Rs.55,000
33) Rohit sold his old Car for Rs.1,15,000 incurring a loss of 2,50,000. What is the net book value of
Machinery sold –
(a) Rs.3,65,000 (b) Rs.2,50,000 (c) Rs.1,15,000 (d)Rs.1,35,000
34) If the machinery costing Rs.18,000 is sold after 2 years for Rs.16,000 and the depreciation rate
is 10% per annum on straight line method, then the profit or loss from the sale of machine is –
(a) Rs.3,600 (profit) (b) Rs.1,600 (loss) (c) Rs.1,600 (profit) (d) No profit & loss
35) Depreciated value after 2 years of an asset costing Rs.10,000 depreciated at 10% on fixed
installment method is Rs.— and on reducing balance method is Rs.—
(a) Rs. 8,100 and Rs. 8,000 (b) Rs. 9,000 and Rs. 8,000
(c) Rs. 8,000 and Rs. 8,100 (d) None
36) Purchase price of Scooter Rs.17,000, Expenses to be capitalized Rs.3,000. The rate of
depreciation on SLM basis is 9%, estimated useful life is 10 years. The Estimated Residual Value
will be-
(a) Rs. 2,000 (b) Rs. 5,000 (c) Nil (d) Rs. 20,000
37) Sangam Trading Co. purchased one Machinery on 1st Jan. 2005 costing Rs.88,000 and spent
Rs.2,000 on its erection. On 30th June 2005, an additional Machinery was purchased. Company
provides depreciation every year ending on 30th June @ 10%p.a. and the depreciation amounts
to Rs.4500. What is the cost of additional Machinery purchased?
(a) Rs.8,000 (b) Rs.10,000 (c) Rs.5,000 (d)Not Ascertainable
38) Payment to vendor for machinery Rs.1,00,000. Transportation Cost – Rs.1,000. Installation costRs.9,000. Estimated gross scrap value- Rs.12,000, estimated cost of disposal of asset Rs.2,000.
Estimated life-10 years. Annual depreciation is-
(a) Rs.9,800 (b) Rs.10,000 (c) Rs.10,200 (d) Rs. 9,600
39) Cost of a machine is Rs.1,05,000. residual value is Rs.5,000. Useful life is estimated to be 10 years.
Depreciation is charged on straight line basis. The machine was revalued at Rs.80,000 at the end
of the 8th year. On Revaluation.
(a) There is Revaluation Profit of Rs.60,000 (b) There is Revaluation Profit of Rs.55,000
(c) There is Revaluation Profit of Rs.65,000 (d) There is Revaluation Profit of Rs.50,000
40) 40) On Revaluation, Depreciation for the 9th year shall be:
(a) Rs.10,000 (b) Rs.10,500 (c) Rs.40,000 (d) Rs.8,000
41) On sale of Machine M1 on 01/10/2005, the entry against profit & Loss a/c will show:
(a) Loss of Rs.1,250 (b) Profit of Rs.13,500
(c) Profit of Rs.1,250 (d) Profit of Rs.2,750
42) The amount of depreciation provided on 31-12-2005 is:
(a) Rs.7,600 (b) Rs.5,700 (c) Rs.6,100 (d) Rs.7,500
43) The balance c/d on 31/12/2005 is:
(a) Rs.55,300 (b) Rs.55,500 (c) Rs.54,750 (d) Rs.56,750
44) With respect to WDV method of depreciation which of the following is true:-
(a) The amount of depreciation and the rate of depredation decrease every year.
(b) The amount of depreciation and the rate of depreciation increases every year.
(c) The amount of depreciation keeps increasing while rate of depreciation keeps decreasing.
(d) The amount of depreciation decreases while the rate of depreciation remains the same.
45) If depreciation is charged on an asset by Straight line and Reducing balance methods, what will
be the respective amount of depreciation in subsequent years?
(a) Equal in all years
(b) Lower in the first year but equal in subsequent years
(c) Equal in the first year but lower in subsequent years
(d) Equal in the first year but higher in subsequent years in WDV compared to SLM
46) Machinery is purchased on 1-7-03 for Rs.2,00,000 and put to use on that date by company. It is
the policy of the company to provide depreciation for full year whether it is used or not used at
any part of the year on cost basis. If the account is closed on 31st December every year and
depreciation is charged at the rate of 13% per annum what is the amount of depreciation for first
two years.
(a) Rs.52,000 (b) Rs.39,000 (c) Rs.26,000 (d) Rs.19,500
47) The above is actually a:
(a) Cash Book (b) Journal (c) Ledger Account (d) Trial Balance
48) Entry No. 1 Shows:
(a) Sale of Machinery (b) Return Inwards
(c) Purchase of Machinery (d) Repairs of Machinery
49) Entry No.2 Shows:
(a) Depreciation at the year-end (b) Depreciation on New Machinery Purchased
(c) Depreciation on machinery sold (d) None of the above
50) The amount in Entry 4 will indicate:
(a) Loss (b) Profit
(c) Depreciation (d) Written down value
ANSWERS:
1) (a)
2) (c)
3) (b)
4) (b)
5) (c)
6) (a)
7) (c)
8) (b)
9) (c)
10) (d)
11) (c)
12) (c)
13) (b)
14) (b)
15) (b)
16) (d)
17) (c)
18) (c)
19) (d)
20) (d)
21) (b)
22) (a)
23) (a)
24) (a)
25) (b)
26) (b)
27) (d)
28) (d)
29) (c)
30) (d)
31) (d)
32) (b)
33) (a)
34) (c)
35) (c)
36) (a)
37) (d)
38) (b)
39) (b)
40) (c)
41) (a)
42) (b)
43) (a)
44) (d)
45) (c)
46) (b)
47) (b)
48) (c)
49) (a)
50) (a)