Simple Depreciation

The table shows information about a fixed asset.

What is the amount of annual depreciation if the straight line method is used?

• $1300

• $1500

• $1700

• $2000

A vehicle was bought for $20 000 on 1 January. Two years later the vehicle has a book value of

$10 000. Depreciation was calculated using the straight line method.

What is the annual rate of depreciation?

• 16 2/3%

• 25%

• 33 1/3%

• 50%

An office machine cost $8500 and is estimated to have a useful life of four years. Its scrap value at the end of this time is estimated at $1000.

What is the annual charge for depreciation using the straight-line method?

• $1000

• $1875

• $2125

• $2375

Why does a business depreciate a fixed asset?

• to know the profit or loss on disposal

• to know the value at the end of its useful life

• to provide cash for its replacement

• to spread the cost over its expected useful life

A business buys a machine for $20 000. It will be used for 5 years and the estimated residual value is $5000.

What is the annual depreciation charge using the straight line method?

• $1000

• $3000

• $4000

• $5000

Paul purchased a motor vehicle for $15 000. He estimated that it would be used for 5 years and

then be sold for $2000. Paul decided to spread the depreciation of the motor vehicle equally over its working life at the rate of 20 % per annum.

What is the accumulated depreciation at the end of year 2?

• $4680

• $5200

• $5400

• $6000