Accounting - Depreciation Quiz

What is depreciation?

• Total Sum of Fixed Assets

• Total Sum of Liabilities

• Cost of Fixed Assets Consumed

• Cost of Sale of Fixed Asset

What is a reason for depreciation to occur?

• Depletion

• Painting

• New Purchase

• Expensive

Which of the below are reasons why depreciation occurs?

1. Wear & Tear

2. Frequency

3. Obsolescence

• 1

• 2

• 2 & 3

• 1 & 3

Why does businesses need to show depreciation?

• To make provision for replacement of asset

• To adjust the revenues

• To balance the trial balance

• For better use of fixed asset

Equation to calculate depreciation on straight line method is:

• Total fixed asset + Scrap Value

• [ Cost – Scrap Value ] / Estimated life (Years)

• [ Current Asset + Fixed Asset ] * Rate

• Total fixed asset + Scrap Value

Equation to calculate depreciation on reducing balance method is:

• Total fixed asset + Scrap Value

• [ Cost – Scrap Value ] / Estimated life (Years)

• [ Current Asset + Fixed Asset ] * Rate

• [Cost – Previous Year Depreciation ] * Rate

Equation to calculate depreciation on revaluation method is:

• Balance b/d + Purchases – Disposal Book Value – Closing Balance

• [ Cost – Scrap Value ] / Estimated life (Years)

• [ Current Asset + Fixed Asset ] * Rate

• [Cost – Previous Year Depreciation ] * Rate

What is the credit journal entry to transfer asset to disposal account

Debit: Asset Disposal

Credit:.................................

• Asset

• Depreciation

• Balance b/d

• Scrap Value

A camera with a value of $20,000 has a life expectancy of 20 years. What is the amount for depreciation shown on income statement using the straight-line depreciation method if the scrap value of the camera is $2000?

• $900

• $18,000

• $19,100

• $2,900

A printer worth $30,000 is depreciated at a rate of 5% using reducing balance method. What is the depreciation taken on balance sheet for the 2nd year using the reducing balance depreciation method?

• $1,500

• $27,075

• $1,425

• $28,500