Depreciation Calculation Quiz

A sole trader purchases a computer system for $10,000. The system has an estimated useful life of 5 years and a residual value of $1,000. Using the straight-line depreciation method, what is the annual depreciation expense?

• $1,800

• $2,000

• $2,500

• $3,000

A delivery vehicle is purchased for $45,000, with an estimated useful life of 6 years and a residual value of $9,000. What is the annual depreciation expense under the straight-line method?

• $5,000

• $6,000

• $7,500

• $8,000

A sole trader purchases a cash register for $4,000. It has a useful life of 5 years and a residual value of $500. Using the straight-line depreciation method, what will be the carrying value at the end of Year 3?

• $3,000

• $2,300

• $1,900

• $2,500

A shop display unit is purchased for $22,000. It has an estimated useful life of 8 years and a residual value of $2,000. What is the annual depreciation expense?

• $2,000

• $2,500

• $3,000

• $3,500

Why is depreciation recorded in financial statements?

• To increase the value of assets in the business

• To ensure the financial statements provide Faithful Representation by accurately reflecting the asset’s consumption over time

• To reduce tax expenses

• To match revenue and expenses on a cash basis