Depreciation and AmortisationQ-3 | Depreciation and AmortisationQuestion 5072 of 42
All Questions

Depletion method

Options

A
B
C
D
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

Depletion method:  This method is followed in case of exhaustive (wasting) assets e.g., mines.  For charging depreciation on such item the life of the Asset (lease period) is not very important because it can be used (ie., Mineral can be extracted) only till it contains minerals.  As soon as the mineral is exhausted the mine becomes useless.  Therefore depreciation is calculated in proportion of the mineral extracted in a particular year to the total extractable mineral contained in it. Depreciation (per ton, etc.)=Cost of AssetExtractable Quantity of Mineral\text{Depreciation (per ton, etc.)} = \frac{\text{Cost of Asset}}{\text{Extractable Quantity of Mineral}}

Key Concepts to Understand

Depreciation

Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.

More Questions from Depreciation and Amortisation

The following details are available of raw material of a manufacturing unit : 1-5-2024 Opening Inventory 100 units @ Rs. 15 per unit 2-5-2024 Purchases 300 units @ Rs. 18 per unit 5-5-2024 Issued for consumption 250 units 16-5-2024 Purchases 500 units @ Rs. 21 per unit 21-5-2024 Issued for consumption 100 units 25-5-2024 Issued for consumption 450 units The manufacturer also incurred the following expenses: ◆ Freight of 300 and unloading charges of 150 at the time of every purchase respectively. ◆ Warehouse rent of ₹ 2,000 per month. ◆ Administrative Expenses of ₹ 1,500 per month. You are required to find out the value of inventory as on May 31, 2024 if the company follows: (a) Weighted Average method for inventory valuation. (b) First in First Out method for inventory valuation. [Jan. 2025, Marks 5]

Meaning of depreciation

Sum of Years of Digits Method

Depletion method

Discuss the factors taken into consideration for calculation of depreciation. [Nov. 2020, 5 Marks]

Amortisation [Dec. 2021, 1 Mark]

Ready to Master Depreciation and Amortisation?

Practice all 42 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free