Accounting - Study Mode
[#471] A company purchased a vehicle for Rs.6000. It will be used for 5 years and its residual value is expected to be Rs.1000. What is the annual amount of depreciation using straight line method of depreciation?
Correct Answer
(A) Rs. 1000
Explanation
Solution: Cost of the asset = Rs. 6,000
Salvage Value = Rs. 1,000
Total Depreciation Cost = Cost of asset – Salvage Value = 6000 – 1000 = Rs. 5000
Useful life of the asset = 5 years
Thus, annual depreciation cost = (Cost of asset – Salvage Cost)/Useful Life = 5000/5 = Rs. 1000.
[#472] Which of the following is the normal balance of an accumulated depreciation account?
Correct Answer
(B) Credit balance
Explanation
Solution: Credit balance is the normal balance of an accumulated depreciation account. Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.
[#473] How trial balance shows the accumulated depreciation?
Correct Answer
(B) as a credit item
Explanation
Solution: Trial balance shows the accumulated depreciation as a credit item. Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.
[#474] Which of the following is a double entry for deprecation expenses?
Correct Answer
(B) Depreciation expenses Debit and accumulated depreciation Credit
Explanation
Solution: Depreciation expenses Debit and accumulated depreciation Credit is a double entry for deprecation expenses.
[#475] An alternative term used for accumulated depreciation expenses?
Correct Answer
(A) Provision for depreciation
Explanation
Solution: Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.