PRC-1 · Chapter 6 · Question 82 of 100
A company buys a non-current asset for Rs. 100,000. It intends to use it for 10 years and expects a residual value of Rs. 10,000. After 4 years (carrying amount Rs. 64,000), it revises the remaining life to 4 years and the residual value to Rs. 4,000. What is the new annual straight-line depreciation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 15,000
Explanation
Changes in estimates are prospective. New depreciable amount = Carrying Amount (64,000) - New RV (4,000) = 60,000. New remaining life = 4 years. New annual charge = 60,000 / 4 = Rs. 15,000.
More Property, Plant and Equipment MCQs
- Q84A company sells a machine for Rs. 14,000. It originally cost Rs. 50,000 and had been depreciated by Rs. 40,000. The journal entry to…
- Q85Which of the following is the correct formula to calculate the Net Book Value (Carrying Amount) of an asset?
- Q86If an accountant completely omits the year-end adjustment for depreciation, how will the Statement of Financial Position be affected?
- Q87Under the reducing balance method of depreciation, what generally happens to the depreciation expense year over year?
- Q88Which of the following requires a formal change in the depreciation rate or method?