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“DEPRECIATION AND AMORTIZATION”

SPRINT CA-FOUNDATION ACCOUNTING REVISION SERIES BY CA CS ANSHUL AGRAWAL

Q.1. CA-Foundation November 2018 Exam - Changes in Depreciation
A Plant & Machinery costing Rs. 10,00,000 is depreciated on straight line basis assuming 10 years as working life and
zero residual value, for four years. At the end of fourth year, the machinery was revalued upwards by Rs. 40,000. The
remaining useful life was reassessed at 8 years. Calculate depreciation for fifth year.

Q.2. Changes in Depreciation

A Machinery costing Rs. 20,00,000 is depreciated on straight line assuming 10 years working life and nil salvage
value for four years. At the end of the fourth year, the machinery was revalued upwards by Rs. 80,000. The remaining
useful life of the machinery was also reassessed as 8 years at the end of the fourth year. Calculate the
depreciation for 5th Year.

Q.3. CA-Foundation ICAI Study Material Illustration-9 SLM

A firm purchased second hand machinery on 1 st January, 2019 for Rs. 3,00,000, subsequent to which Rs. 60,000 and
Rs. 40,000 were spent on its repairs and installation, respectively. On 1 st July, 2020 another machinery was
purchased for Rs. 2,60,000. On 1 st July, 2021, the first machinery having become outdated was auctioned for Rs.
3,20,000 and on the same date, another machinery was purchased for Rs. 2,50,000.
On 1 st July, 2022, the second machinery was also sold off and it fetched Rs. 2,30,000. Depreciation was provided on
machinery @ 10% on the original cost annually on 31 st December, under the straight line method. Prepare asset a/c.

Q.4. CA-Foundation November 2019 Exam

X purchased a machinery on 1st January 2017 for Rs. 4,80,000 and spent Rs. 20,000 on its installation. On July 1, 2017
another machinery costing Rs. 2,00,000 was purchased. On 1st July, 2018 the machinery purchased on 1st January,
2017 having become scrapped and was sold for Rs. 2,90,000 and on the same date fresh machinery was purchased
for Rs. 5,00,000. Depreciation is provided annually on 31st December at the rate of 10% p .a. on written down value.
Prepare Machinery account for the years 2017 and 2018.

“पढ़ते रहो, सीखते रहो, आगे बढ़ते रहो, क्ोोंकि पढ़ना बोंद तो सीखना बोंद और सीखना बोंद तो आगे बढ़ना बोंद।”
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Q.5. CA-Foundation ICAI Study Material Illustration-10 Change in Depreciation
M/s Anshul & Co. commenced business on 1st January 2017, when they purchased plant and equipment for Rs.
7,00,000. They adopted a policy of charging depreciation at 15% per annum on diminishing balance basis and over
the years, their purchases of plant have been:
Date Amount
01/01/2018 Rs.1,50,000
01/01/2021 Rs.2,00,000
On 1-1-2021 it was decided to change the method and rate of depreciation to straight line basis. On this
date remaining useful life was assessed as 6 years for all the assets purchased before 1.1.2021 with no
scrap value and 10 years for the asset purchased on 1.1.2021.

SPRINT CA-FOUNDATION ACCOUNTING REVISION SERIES BY CA CS ANSHUL AGRAWAL

Required: Calculate the difference in depreciation to be adjusted in the Plant and Equipment Account for
the year ending 31st December, 2021.

Q.6. CA-Foundation ICAI Study Material Illustration-6 Depletion Method

M/s Surya & Co. took lease of a quarry on 01/01/17 for Rs. 1,00,00,000. As per technical estimate the total quantity
of mineral deposit is 2,00,000 tonnes. Depreciation was charged on the basis of depletion method. Extraction pattern
is given in the following table:
Year Qty. of Minerals Extracted
2017 2,000 Tonnes
2018 10,000 Tonnes
2019 15,000 Tonnes
Required: Show the Quarry lease account and Depreciation Account for each year from 2017 to 2019.

Q7. CA-Foundation ICAI Study Material Illustration-13 Amortization on Intangible Asset

Kumar R&D Co. registered a patent (the patent meets the criteria of an intangible asset) on 1 st July, 2021
developed at a cost of Rs. 28,00,000 and spent Rs. 2,00,000 towards legal fees and registration. The patent
is granted for a period of 10 years. The books are closed on 31st December every year.
Required, Show the Patent Account and Amortisation Account for the year 2021 and 2022.

Q8. CA-Foundation ICAI Study Material Illustration-14 Amortization on Intangible Asset

Prime Streaming Co. acquired the streaming rights of a movie for Rs. 18,00,000 with the contracted
duration of the streaming period being 10 years. At the beginning of the fourth year, based on the decline
in viewership, Prime Streaming Co. decided to stream the movie only for the next 5 years.
Required, Calculate amortisation for the fourth year.

Q9. CA-Foundation June 2023 Exam 10 Marks – Provision for Depreciation Method
The following balances appear in the books of Dheeraj Enterprises:
Machinery account as on 01.04.2021 Rs. 12,00,000
Provision for depreciation account as on 01.04.2021 Rs. 4,65,000
On 1st October, 2021 the Machinery which was purchased on 1st April, 2018 for Rs. 2,00,000 was sold for
Rs. 1,10,000 and on the same date another Machinery was purchased for Rs. 4,80,000. The firm has been
charging depreciation at 10% p.a. on written down value of the Machinery every year. Prepare the
Machinery account, Provision for Depreciation account and Machinery disposal account for the year ending
31st March, 2022.

Q10. CA-Foundation ICAI Study Material Q1 - Provision for Depreciation Method

A firm’s plant and machinery account at 31st December 2021 and the corresponding depreciation provision
account, broken down by year of purchase are as follows:
YEAR OF PLANT & MACHINERY DEPRECIATION PROVISION
PURCHASE (At Cost) Rs. Rs.
2005 2,00,000 2,00,000
2011 3,00,000 3,00,000
2012 10,00,000 9,50,000
2013 7,00,000 5,95,000
2020 5,00,000 75,000
2021 3,00,000 15,000
TOTAL 30,00,000 21,35,000

“Hath Nahi Chhodunga, Sath nahi Chhodunga”

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Depreciation is at the rate of 10% per annum on original cost. It is company’s policy to assume that all
purchases, sales or disposal of plant occurred on 30th June in the relevant year for the purpose of calculating
depreciation, irrespective of the precise date on which these events occurred.

During 2015 the following transactions took place:

1. Purchase of plant and machinery amounted to Rs. 15,00,000.
2. Plant that has been bought in 2011 for Rs. 1,70,000 was scrapped.
3. Plant that has been bought in 2012 for Rs. 90,000 was sold for Rs. 5,000.
4. Plant that has been bought in 2013 for Rs. 2,40,000 was sold for Rs. 15,000.
You are required to calculate the provision for depreciation of plant and machinery for the year ended 31st

SPRINT CA-FOUNDATION ACCOUNTING REVISION SERIES BY CA CS ANSHUL AGRAWAL

December 2022. In calculating this provision you should bear in mind that it is company’s policy to show
any profit or loss on disposal of plant as a completely separate item in the profit and loss account. You are
also required to prepare the following ledger accounts during the year 2022.
(i) Plant and Machinery Account (at Cost);
(ii) Depreciation Provision Account
Sale of Disposal of Plant and Machinery Account.

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“पढ़ते रहो, सीखते रहो, आगे बढ़ते रहो, क्ोोंकि पढ़ना बोंद तो सीखना बोंद और सीखना बोंद तो आगे बढ़ना बोंद।”