Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting – I (111) : - Question Paper

2004-05 (10% on Rs.7,00,000) Rs. 70,000
2005-06 (10% on Rs.6,30,000) Rs. 63,000
Rs.1,33,000
Depreciation to be given on the straight line method :
2004-05 (10% on Rs.7,00,000) Rs. 70,000
2005-06 (10% on Rs.7,00,000) Rs. 70,000
Rs.1,40,000
Further depreciation to be given for
Rs. 1,40,000 – Rs.1,33,000 = Rs. 7,000
As per AS- six any change in the method of depreciation is treated as a change in accounting policy and its effect should be quantified and disclosed.
Thus, the gross profit of the company will be Rs.2,21,000.
Machinery Account
Dr. Cr.
Date
Particulars
Rs.
Date
Particulars
Rs.
1.4.2003
To Balance
7,00,000
31.3.2004
By Depreciation (on Rs.7,00,000 @10%)
70,000
31.3.2004
By Balance c/d
6,30,000
7,00,000
7,00,000
1.4.2004
To Balance
b/d
6,30,000
31.3.2005
By Depreciation (on Rs.6,30,000 @ 10%)
63,000
By Balance c/d
5,67,000
6,30,000
6,30,000
1.4.2005
To Balance b/d
5,67,000
31.3.2006
By Depreciation (due to change in method)
7,000
1.10.2005
To Bank (New machine)
60,000
By Depreciation (on Rs.7,00,000 @ 10% p.a for the year)
70,000
To Bank (installation expenses)
6,000
By Depreciation (on Rs.66,000 for six months@10% p.a.)
3,300
By Balance c/d
5,52,700
6,33,000
6,33,000
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34.
ans : (e)
cause : Material cost, wages, fair share of indirect expenses and funding cost can be capitalized and salary paid to administration staff is not capitalized
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35.
ans : (c)
cause : In case of companies extracting natural resources, after estimating the total production potential, the unit cost can be calculated by using the above method. Straight-line method Diminishing Balance method and SUM-OF-The- Years’-Digit methods are not improper for obvious reasons.
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36.
ans : (e)
cause : Depreciation under sum-of-the-years’ digits method for the year 2005-06
=
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37.
ans : (b)
cause : The formula for computation of depreciation under units-of –production method is original cost minus scrap value multiplied by the no. of units produced during the particular year divided by the total number of units produced during the entire useful life of the asset. ie,(100000-10000)x12000/72000 = 15,000.
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38.
ans : (a)
cause : According to Accounting Standard –6 depreciation is to be given on the basis of historical cost of the asset.
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39.
ans : (a)
cause : When a fixed asset is acquired in exchange of a different asset its cost is usually determined by reference to the net book value of the asset provided up.

Earning:   Approval pending.