1

ACCOUNTING CLASS TEST

Topic: Depreciation-1
Course Instructor: Mriganka Sekhar Balo. B. Com (Hons) M. Com. in Accounting, MBA (Dhaka University)
Duration: 45 minutes Full Marks: 25 marks

1. What is the purpose of charging depreciation on fixed assets?

A to gather a sum of money to fund a replacement fixed asset in the future.
B to charge the cost of using the asset against income.
C to ensure that profits are not understated
D to show the market value of the asset.
2. Depreciation is a –
A Cash items
B Nin-cash item
C Payment
D Receipt
3. Which of the following is not a cause of depreciation?
A Passage of time
B Wear and Tear
C Obsolescence
D Maintenance
4. The Net Book Value of noncurrent assets represent—
A Its market value
B Cost less accumulated depreciation
C Its scrap value
D Its original cost
5. ABC Motors bought a vehicle for £6 400 with an expected useful life of 10 years and a scrap value of
£1 000. What would be the depreciation charge for the current year?
A £740
B £100
C £640
D £540
(5×1=5 marks)
 2

6. Mary Gray, a sole trader, commenced business on 1 January 2012. On that day she purchased the
following motor vehicles on credit from B Lue Traders, for use in the business.
Vehicle 1 Delivery van £10 000
Si
Vehicle 2 Salesman’s car £15 000

The business’s depreciation policy stated that depreciation is provided at 25% on a straight-line basis on
all motor vehicles owned at the year end. A full year’s depreciation is charged in the year of purchase, but
no depreciation is charged in the year of sale.
On 1 July 2014 Mary decided to sell her delivery van to another trader for £2 500. This amount was
received in cash.
Prepare the following accounts for the years ended 31 December 2012 to 31 December 2014. Balance the
accounts, where appropriate, and bring down the balances on 1 January 2015.

Motor Vehicle Account

Date Details £ Date Details £

Provision for Depreciation on Motor Vehicle Account

Date Details £ Date Details £

Motor Vehicle Disposal Account

Date Details £ Date Details £

(6+8+6=20 marks)