Depreciation in Accounting Quiz

What is the purpose of depreciation in accounting?

• To increase the asset’s value over time

• To spread the cost of a non-current asset over its useful life

• To calculate profit on an asset sale

• To avoid paying taxes

Which formula is used in the straight line method of depreciation?

• (Cost – Salvage value) ÷ Useful life

• (Cost + Salvage value) ÷ Useful life

• Cost ÷ Units produced

• Salvage value ÷ Years of use

A business buys equipment for $10,000 with a useful life of 5 years and no salvage value. What is the annual depreciation using the straight line method?

• $1,000

• $5,000

• $2,000

• $10,000

Which of the following is an advantage of the straight line method?

• It varies based on output

• It is easy to calculate

• It provides more accurate tax deductions

• It accounts for maintenance costs

Which is a disadvantage of the straight line method?

• It may not reflect how the asset loses value in real life

• It requires tracking production units

• It changes each year

• It is allowed for tax use only

The units of production method is based on:

• The age of the asset

• The total revenue of the business

• Actual usage or output of the asset

• The purchase date

A business buys a printer for $6,000 with a $600 salvage value and expects it to produce 180,000 pages. What is the depreciation per unit?

• $0.05

• $0.03

• $0.10

• $0.20

What makes units of production method more suitable for some businesses?

• It is always accepted for tax purposes

• It results in consistent annual depreciation

• It reflects actual wear and tear

• It increases the asset’s value over time

Which is a disadvantage of using the units of production method?

• It is easier to calculate

• It relies on estimated production output

• It does not reflect actual usage

• It makes accounting less flexible

When using units of production, what happens in years of high output?

• The asset appreciates

• Depreciation is zero

• Depreciation expense is higher

• Depreciation stays the same