Chapter 8 - Objective Type

8/13/2019 Chapter 8 - Objective Type

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Chapter 8: Accounting for Fixed Assets and Depreciation

Multiple Choice Questions

1. Which of the following expenses can be capitalized:a. Purchase price of the assetb. Installation Costc. Cost of test rund. Interest on borrowed funds for acquiring the assete. All of the above

2. Which of the following statements is true about depreciation:a. It represents fall in the market price of the asset due to passage of timeb. It results in creation of cash reserves necessary for replacement of assetc. It involves apportionment of cost of an asset over its useful life in a systematic

manner

d. Depreciation is charged both on current assets as well as fixed assetse. Both b) and c) above

3. Depreciation as per SLM as compared to WDV:a. Is always lowerb. Is always higherc. Is higher in the initial years and lower in the later yearsd. Is lower in the initial years and higher in the later yearse. None of the above

4. Apportionment of cost of intangible assets over its useful life is called:a. Amortization

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Sanjay Dhamija Financial Accounting for Managers


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b. Depletionc. Depreciationd. Impairmente. Obsolescence

5. As per Indian Income Tax Act 1961, depreciation is computed by using:a. Straight Line Methodb. Written Down Value Methodc. Sum of Year Digits Methodd.

Either a) or b) at the discretion of the management

e. Either a) or b) at the discretion of the Income Tax Officer6. Which of the following expenses can be recognized as Intangible asset:

a. Advertising expenses to create brand image of the companyb. Expenses incurred to search for a new drugc. Development expenses for a new design resulting in a patentd. Training expenses to enhance employees skillse. Software expenses

7. A machine purchased on 1st January 2009 for `10 million is being depreciated usingstraight line method with a useful life of 10 years and residual value of `1 million. The

gross block in the Balance Sheet as on 31st

a. `7 million

December 2011 in respected of this machine

will be:

b. `8 millionc. `7.3 million




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d. `8.2 millione. `10 million

8. A machine purchased on 1st January 2009 for `10 million is being depreciated usingwritten down value @ 20% per annual. Proportionate depreciation is charged in the year

of acquisition. The depreciation to be charged in the Profit & Loss A/c for the year ended

31st

a. `2,000,000March 2012 in respect of this machine will be:

b. `1,024,000c. `1,280,000d. `1,520,000e. None of the above

9. Goodwill recognized on acquisition is:a. Not amortized in the books of accountsb. Amortized over a period of 5 yearsc. Amortized over a period of 10 yearsd. Amortized over a period of 15 yearse. Amortized over a period decided by the management

10.Which of the following is true in respect of intangible assets:a. They are normally amortized over 10 yearsb.

Residual value is assumed to be zero

c. They are amortized using Straight Line Methodd. All of the above are truee. None of the above are true




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1. Name them:Objective Type Questions:

a.

Assets intended to be used over a long period of time

b. Apportionment of cost of intangible assets over its useful lifec. Assets without any physical substanced. Method of providing depreciation where same amount of depreciation is charged

each year

e. Apportionment of cost of natural resources over its useful lifef. Methods of charging depreciation where higher depreciation is charged in the

initial years

g. Difference between the carrying amount of an asset and its recoverable amounth. Excess of purchase consideration over the net assets being acquired

2. True of Falsea.

Once an asset is sold, it is removed from the book of accounts

b. Gain arising on revaluation of an asset is transferred to Profit & Loss Accountc. Depreciation rates as per Companies Act and Income Tax Act are samed. Land is depreciated on a SLM basise. Expenses incurred on research can be capitalizedf. Self generated goodwill cant be recognizedg. As per WDM the net book value of the asset will never fall to zeroh. Depreciation is a non-cash expensei. Intangible assets are normally amortized on WDM basis.j. Research and Development costs are capitalized as Intangible asset.




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Multiple Choice Questions

1. e) All expenses incurred to bring the asset to its intended use.2. c) Depreciation is charged only on fixed assets, it does not reflect fall in market price nor

provides funds for replacement of asset.

3.

d)4. a)5. b)6. c) All other options do not meet the criteria for recognition and an intangible asset7. e) Gross block will continue to be shown at the cost of acquisition8. d) Depreciation for 2009-10 : `500,000, 2010-11: `1,900,000 and 2011-12: `1,520,0009. b) As per AS 26 goodwill is amortized over a period not exceeding 5 years.10.d) As per AS 26 intangible assets are usually amortized over 10 years using straight line

method with nil residual value.

1. Name themObjective Type Questions:

a. Fixed Assetsb. Amortizationc. Intangible Assetsd. Straight Line Methode. Depletionf. Accelerated Methodsg. Impairmenth. Goodwill

2. True or Falsea. Trueb. False transferred directly to Revaluation Reserve Accountc. Falsed. False Land is a non depreciable assete. False Charged to Profit & Loss Accountf. Trueg. Trueh. Truei. False They are amortized using SLMj.

False Research costs are treated as expense whereas development costs arecapitalized as intangible assets.



Chapter 8 - Objective Type

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