Introduction to depreciation

All of the following are examples of capital expenditure, except for?

• Significant improvements to the asset

• The purchase price of the asset

• Repairs and maintenance of the asset

• Costs to install and prepare the asset for use

Select all of the non-current assets from the options below.

• Inventory

• Vehicle

• Buildings

• Accounts Receivable

Calculate the depreciable amount given the information below: Cost = $45 000 & Residual value = $10 000

• $4500

• $35 000

• $45 000

• $55 000

One of your mates is talking about selling his business equipment in 5 years time for about $3500. What accounting terms is he referring to?

• Useful life of the equipment is 5 years

• The cost of the asset is $3500

• The residual value of the asset is $3500

• The annual depreciation is $3500

Identify the missing words from the explanation of depreciation below:

•Depreciation is the allocation of the _____________ of an asset over its useful life.

•Depreciable amount is the ______________ of the non-current asset less the residual value.

•Residual value is the amount expected to receive on ______________ of the asset at the end of its useful life.

• depreciable amount, cost, disposal

• depreciable amount, carrying amount, disposal

• cost, carrying amount, sale

• cost, accumulated depreciation, sale

Calculate the depreciation expense given the information below:

Cost $35000, residual value = $5000, useful life = 10 years

• $3000

• $3500

• $30000

• $40000

Calculate the accumulated depreciation after three years if the depreciation expense is $2000 per year

• $2000

• $4000

• $6000

• $8000

Calculate the carrying amount of an asset if its cost if $40000 and its accumulated depreciation is $15000.

• $15000

• $25000

• $40000

• $55000

Calculate the carrying amount of the asset after 2 years if its cost is $25000, residual value is $5000 and its useful life is 10 years.

• $4000

• $16000

• $20000

• $21000

Calculate the depreciation expense of the asset after 1 year given the information below:

Purchase price = $38 000

Improvements = $6 000

Annual Maintenance = $2000

Useful life = 10 years

Residual value = $12 000

• $2600

• $3200

• $3400

• $3600