
Understanding Depreciation Methods
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Other
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University
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Practice Problem
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Hard
Amal francis
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15 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is straight-line depreciation?
A technique for valuing an asset based on its market price.
A method of increasing an asset's value over time.
A way to calculate depreciation based on the asset's revenue generation.
A method of depreciating an asset evenly over its useful life.
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
How is straight-line depreciation calculated?
Depreciation = Cost / Useful Life
Depreciation = (Cost + Salvage Value) / Useful Life
Depreciation = (Cost - Useful Life) / Salvage Value
Depreciation = (Cost - Salvage Value) / Useful Life
3.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
What are the advantages of using straight-line depreciation?
It is the only method accepted by tax authorities.
Advantages of using straight-line depreciation include simplicity, consistency in expense recognition, and ease of understanding for financial reporting.
It requires complex calculations for each asset.
It allows for accelerated tax benefits.
4.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
What is the declining balance method of depreciation?
A linear depreciation method that spreads the cost evenly over the asset's useful life.
A method that calculates depreciation based on the asset's original cost.
A method that only applies to intangible assets like patents and trademarks.
The declining balance method of depreciation is an accelerated depreciation method that applies a constant percentage to the declining book value of an asset.
5.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
How is the declining balance method different from straight-line depreciation?
The declining balance method is used for land, while straight-line is for buildings.
Both methods result in the same total depreciation over the asset's life.
The declining balance method results in higher depreciation in early years, while straight-line depreciation is consistent over time.
Straight-line depreciation allows for accelerated write-offs compared to declining balance.
6.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
What formula is used to calculate declining balance depreciation?
Depreciation Expense = Book Value at Beginning of Period x Depreciation Rate
Depreciation Expense = Total Cost x Useful Life
Depreciation Expense = Annual Revenue x Depreciation Rate
Depreciation Expense = Book Value at End of Period x Depreciation Rate
7.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
What is the effect of using a higher depreciation rate in the declining balance method?
It has no impact on taxable income or expenses.
It increases the asset's book value over time.
It reduces overall expenses in the later years.
It accelerates depreciation, leading to higher expenses in early years and lower taxable income.
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