Depreciation 5-21-2024

Multiple Choice

Plant assets are used in operations and have useful lives that extend over more than one accounting period.

• True

• False

Multiple Choice

Purchase of property for new office

• Capital Expenditure

• Revenue Expenditure

Multiple Choice

Wages and Salaries of office workers

• Capital Expenditure

• Revenue Expenditure

Multiple Choice

Purchase of delivery van

• Capital Expenditure

• Revenue Expenditure

Multiple Choice

Installation of new machinery

• Capital Expenditure

• Revenue Expenditure

Multiple Choice

Expenditures for the maintenance of non-current assets are treated as

• revenue expenditure

• capital expenditure

• revenue

• expenses

Multiple Choice

Expenditures relating to the acquisition of non current assets are treated as

• capital expenditure

• revenue expenditure

• expenses

• revenue

Multiple Choice

Characteristic of a depreciation is -

• Decline in the value of assets

• Depreciation is a permanent nature

• Depreciation is a known case expense

• All of these

Multiple Choice

Depreciation arises because of -

• Obsolescence

• Constant use of assets

• expiry of time

• All of these

Multiple Choice

Factors taken into consideration for providing depreciation are -

• Total cost of assets

• Estimated useful life of the asset

• Estimated scrap value of the asset

• All of the above

Multiple Choice

Depreciation in the value of asset is -

• Permanent decrease

• Temporary decrease

• Seasonal decrease

• None of these

Multiple Choice

Depreciation is provided on -

• Current assets

• Fictitious assets

• Fixed assets

• Intangible assets

Multiple Choice

Recording an equal amount of depreciation expense for a plant asset in each year of its useful life.

• units-of-production method
• straight-line-depreciation
• salvage value
• real property

Multiple Choice

Under the straight line method, depreciation is calculated using

• (Original cost – scrap value) / useful life

• Rate of depreciation per annum * Net Book Value

• Rate of depreciation per annum * (Net Book Value – scrap value)

• Rate of depreciation per annum * original cost

Multiple Choice

The only long-term asset that does not depreciate is:

• Land Improvements
• Land
• Building
• Trademarks

Multiple Choice

What is one advantage of the double declining balance method?

• Most of the depreciation happens later in the asset's life

• Depreciation is consistent

• More of the depreciation happens early in the asset's life

• It eliminates all depreciation.

Causes

• By Constant Use- When the fixed assets like a motor vehicle, machinery are used for a good amount of time, it manages to wear out

• By Expiry of Time- Due to natural calamities or elements of nature land may start to erode. Similarly, the machinery particles might start rusting

• Outdated Technology- The machine and the technology used today might be outdated and might have to be discarded

• Increase in production- The existing vehicle or machine used is not capable of taking bulk orders

• By Depletion- Exhaustion of resources due to its constant use.

Following are the 3 principal features of depreciation:

• Depreciation is a decrease in the book value of fixed assets.

• Depreciation is an ongoing process until the end of the life of assets.

• Depreciation involves loss of value of assets due to the passage of time and obsolescence.

Multiple Choice

Costs incurred to increase the operating efficiency or useful life of a fixed asset are referred to as..

• capital expenditures

• expense expenditure

• ordinary repairs

• revenue expenditure

Multiple Choice

In computing depreciation, salvage value is...

• the fair value of a plant asset on the date of acquisition.

• subtracted from accumulated depreciation to determine the plant asset's depreciable cost.

• an estimate of a fixed asset's value at the end of its useful life.

• ignored in all the depreciation methods.