Straight Line Method(SLM)

Q. On 1st April, 2015, X Ltd. purchased a machine costing ₹ 4, 00, 000 and spent ₹ 50, 000 on its installation. The estimated life of the machinery is 10 years, after which its residual value will be ₹ 50, 000 only. Find the amount of annual depreciation according to the Fixed Instalment Method and prepare Machinery Account for t he first three years. The books are closed on 31st March every year.

Q.

Prepare Trail Balance from the following information:

Bank overdraft Rs.28, 000, Cash in hand Rs.4, 000, Purchase return Rs.8, 000, Sundry expenses Rs.24, 000, Sales return Rs.16, 000, Salaries Rs.16, 000, Purchases Rs.56, 000, Sales Rs.88, 000, Creditors Rs.24, 000, Debtors Rs.16, 000, Stock (opening) Rs.20, 000, Machinery Rs.40, 000, Capital Rs.44, 000.

Q.

Original cost of machine is Rs. 4, 00, 000 with a scrap value of Rs. 25, 000 after 4 years. Calculate rate of Depreciation.

Q. According to straight line method, the amount of depreciation every year.

1. increases
2. decreases
3. remains constant

Q.

Under which depreciation method the amount of depreciation expense remains same throughout the useful life of a fixed asset?

1. Straight line method

2. Reducing balance method

3. Number of units produced method

4. Machine hours method

Q.

Depreciation is always charged on ___________assets

1. Current

2. Fixed

3. Fictitious

4. Intangible

Q.

___method is not recognised by the income tax.

1. Diminishing Balance
2. Written Down Value
3. None of these
4. Straight Line

Q.

Mr. Muneesh maintains his books of accounts from incomplete records.
His books provides the information

$\begin{array}{ccc}\text{Items}& \text{Jan 1, 2005}& \text{Dec 31, 2005}\\ \text{Cash}& 1,200& 1,600\\ \text{Bills Receivable}& \underset{–}{}& 2,400\\ \text{Debtors}& 16,800& 27,200\\ \text{Stock}& 22,400& 24,400\\ \text{Investment}& \underset{–}{}& 8,000\\ \text{Furniture}& 7,500& 8,000\\ \text{Creditors}& 14,000& 15,200\end{array}$

He withdrew Rs. 300 per month for personal expenses. He sold his investment of Rs.16, 000 at 2% premium and introduced that amount into business.

Q.

The following balances appear in the books of Crystal Ltd on January 1, 2005

$\begin{array}{cc}\text{Items}& \left(Rs\right)\\ \text{Machinery account on}& 15,00,000\\ \text{Provision for depreciation account}& 5,50,000\end{array}$

On April 1, 2005, a machinery which was purchased on January 1, 2002 for Rs 2, 00, 000 was sold for Rs 75, 000. A new machine was purchased on July 1, 2005 for Rs 6, 00, 000. Depreciation is provided on machinery at $20\%$ per annum on straight line method and books are closed on December 31st every year. Prepare the Machinery account and Provision for depreciation account for the year ending December 31, 2005.

Q.

Annual depreciation of machine is Rs. 40, 000, cost of machine is Rs. 5, 00, 000, rate of depreciation according to straight-line method will be-

1. 9%

2. 18%

3. 16%

4. 8%

Q.

Mr. Arnav does not keep proper records of his business. He provided following information.You are required to prepare a statement showing the profit or loss for the year.

$\begin{array}{cc}\text{Items}& \text{(Rs.)}\\ \text{Capital at the beginning of the year}& 15,00,000\\ \text{Bills receivable}& 60,000\\ \text{Cash in hand}& 80,000\\ \text{Furniture}& 9,00,000\\ \text{Building}& 10,00,000\\ \text{Creditors}& 6,00,000\\ \text{Stock in trade}& 2,00,000\\ \text{Further capital introduced}& 3,20,000\\ \text{Drawings made during the period}& 80,000\end{array}$

Ascertainment of statement of affairs at the end of the year and calculation of profit and loss.

Q.

Cost of the asset is Rs 5, 00, 000. Residual Value is Rs. 1, 00, 000. If the useful life of asset is 10 years, What will be the amount of depreciation under SLM?

1. Rs. 40, 000

2. Rs. 50, 000

3. Rs. 10, 000

4. Rs. 60, 000

Q.

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 deprecation using straight line method of depreciation?

1. Rs 1000

2. Rs 2000

3. Rs 3000

4. Rs 3300

Q.

Evergreen Traders purchased a machine on 1st April, 2012 at a cost of Rs. 8, 000 and spent Rs. 2, 000 on its installation. The firm writes off depreciation @ 10 % per annum by fixed instalment method.
Show the machine account for 4 years in the books of Evergreen Traders. The books are closed on 31st March every year.

Q.

Carriage Transport Company purchased 5 trucks at the cost of Rs 2, 00, 000 each on April 1, 2001. The company writes off depreciation @ $20\%$ per annum on original cost and closes its books on December 31st, every year. On October 1, 2003, one of the trucks is involved in an accident and is completely destroyed. The insurance company has agreed to pay Rs 70, 000 in full settlement of the claim. On the same date, the company purchased a second-hand truck for Rs 1, 00, 000 and spent Rs 20, 000 on its overhauling. Prepare Truck account and Provision for depreciation account for the three years ended on December 31, 2003. Also, give Truck account if truck disposal account is prepared.

Q.

If the estimated useful life of an asset is 10 years, the straight line depreciation rate would be:

1. 1%

2. 0.01%

3. 0.1 %

4. 10%

Q.

Rs Ltd purchased a vechile for Rs. 4, 00, 000. After 4 years its salvage value is estimated at Rs. 40, 000. Find out the amount of depreciation to be charged every year based on straight line basis, and also show the vehicle account as would appear for four years assuming it is sold for Rs. 50, 000 at the end of the fourth year when depreciation is charged to asset account. Prepare the ledger in the books of account of RS. Ltd.

Q. The value of an asset is Rs.9, 00, 000 and scrap value is Rs.1, 25, 000. If the life of asset is 10 years, then the cost of depreciation is . (SLM Method)

1. Rs.65, 000
2. Rs.89, 000
3. Rs.77, 500
4. Rs.78, 000

Q.

If book value of a fixed asset equals to market value or sale proceeds of a fixed asset then :

1. there will be gain on sale

2. None of the above

3. no loss, no gain

4. there will be loss on sale

Q.

Sudarshan Ltd. purchased a machinery of Rs.1, 00, 000 and spent Rs. 10, 000 on its installation. The estimated useful life of the asset is 10 years. Calculate depreciation for the year ending 31st March, 2016 in each of the following instances.
(i) Depreciation is to be charged @ 10 % per annum and the machinery was purchased on 1st April, 2015.
(ii) Depreciation is to be charged @ 10 % per annum and the machinery was purchased on 1st October, 2015.
(iii) Depreciation is to be charged @ 10 % and the machinery was purchased on 1st January, 2016.

Q. According to method, the formula of depreciation is $\frac{Costoftheasset-Scrapvalue}{Lifeoftheasset}$

1. straight line
2. written down value
3. amortisation
4. depletion

Q.

(Cost of the asset minus scrap value)/ Life of the asset is the formula of ___

1. Diminishing balance method

2. Annuity method

3. Straight line method

4. Sum of the digits method

Q.

Madhukar Ltd. purchased a truck for Rs.7, 50, 000 on 1st July, 2014. Depreciation is charged on truck @ 15 % per annum on straight line method. On 1st October, 2016, the truck met with an accident. It was sold for Rs.2, 00, 000. Prepare truck account for three years assuming that the company closes its books on 31st December every year.

Q.

If value of an asset is Rs 9, 00, 000, scrap value is Rs 1, 25, 000, estimated life is 10 years, then the cost of depreciation under straight-line method will be-

1. Rs 65, 000

2. Rs 89, 000

3. Rs 77, 500

4. Rs 78000

Q. According to method, the cost of the asset is spread uniformly over the life of the asset.

1. straight line
2. written down value
3. amortisation
4. depletion

Q.

Cost of the fixed asset – Salvage value =

1. Market value

2. Depreciable cost

3. Book value

4. None of these

Q. If the book value of a fixed asset equals the sales proceeds, then there will be .

1. gain on sale
2. loss on sale
3. no loss, no gain

Q.

ABC Company provides the following information:

Cost of the equipment: Rs. 5, 000
Salvage value: Rs. 500
Useful life of equipment: 10 years
Under straight line method, the yearly depreciation charge is:

1. Rs. 450

2. Rs. 500

3. Rs. 550

4. Rs. 50

Q. Original cost = Rs. 80, 000, Life = 10 Years, Estimated salvage Value = 4, 000.
As per SLM method rate of depreciation p.a. = ____________.

1. 10.55%
2. 9.50%
3. 10%
4. 9.80%

Q.

Under straight line method with salvage, depreciation is calculated on?

1. Market value of asset

2. Cost of a fixed asset

3. Cost of repairs of a fixed asset

4. Cost of fixed asset - Salvage value