Sample Multiple Choice Questions (MCQ's) for CA Foundation - Paper 1 - Principal and Practice of Accounting - Chapter 5 CONCEPT AND ACCOUNTING OF DEPRECIATION - For Practice relevant for Dec 22 and May/June 23 Examinations

Q: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

  1. Rs 3,60,000
  2. Rs 1,20,000
  3. Rs 1,80,000

Answer: 1

Q:2  Obsolescence of a depreciable asset may be caused by: 

  • Technological changes. 

  • Improvement in production method. 

  • Change in market demand for the product or service output.

  • Legal or other restrictions.

  1. Only (I) above
  2. Both (I) and (II) above
  3. All (I), (II), (III) and (IV) above

Answer: 3

Q:3  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

  1. Historical cost
  2. Net realizable value
  3. Cost less depreciation

Answer: 2

Q:4 In the case of downward revaluation of a plant which is for the first time revalued, the account to be debited is

  1. Plant account
  2. Revaluation Reserve
  3. Profit & Loss account

Answer: 3

Q:5  The portion of the acquisition cost of the tangible asset, yet to be allocated is known as

  1. Written down value
  2. Accumulated value
  3. Realisable value

Answer: 1

Q:6 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 ?

  1. Loss of Rs 1,30,000
  2. Gain of Rs 1,20,000
  3. Gain of Rs 5,000
  4. Loss of Rs 5,000

Answer: 4

Q:7  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 ?

  1. Debit of Rs 5,00,000
  2. Debit of Rs 1,00,000
  3. Credit of Rs 5,00,000
  4. Credit of Rs 1,00,000

Answer: 2


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