Understanding Depreciation Methods

Understanding Depreciation Methods

University

20 Qs

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Understanding Depreciation Methods

Understanding Depreciation Methods

Assessment

Quiz

Business

University

Practice Problem

Easy

Created by

NandeeshKumar C

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20 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is straight-line depreciation?

A technique for estimating future cash flows

A method of calculating interest on loans

Straight-line depreciation is a method of allocating the cost of an asset evenly over its useful life.

A way to increase asset value over time

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How is straight-line depreciation calculated?

Straight-line depreciation = (Cost + Salvage Value) / Useful Life

Straight-line depreciation = (Cost - Salvage Value) / Useful Life

Straight-line depreciation = Cost / Useful Life

Straight-line depreciation = (Cost - Useful Life) / Salvage Value

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the advantages of using straight-line depreciation?

It requires complex calculations for each asset.

It allows for accelerated tax benefits.

It is only applicable to intangible assets.

Advantages of using straight-line depreciation include simplicity, consistency in expense recognition, and ease of understanding for financial reporting.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the formula for calculating straight-line depreciation?

(Cost - Salvage Value) / Useful Life

(Cost + Salvage Value) / Useful Life

Cost / (Salvage Value + Useful Life)

(Cost - Useful Life) / Salvage Value

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In straight-line depreciation, what does the term 'useful life' refer to?

The rate at which the asset loses value.

The total cost of the asset.

The market value of the asset after depreciation.

The estimated period an asset is expected to be used.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the declining balance method of depreciation?

A linear depreciation method that spreads the cost evenly over the asset's life.

The declining balance method of depreciation is an accelerated depreciation method that applies a constant percentage to the declining book value of an asset.

A method that calculates depreciation based on the asset's original cost.

A method that only applies to intangible assets like patents and trademarks.

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How does the declining balance method differ from straight-line depreciation?

Both methods result in the same total depreciation over the asset's life.

Straight-line depreciation allows for accelerated write-offs compared to declining balance.

The declining balance method is used for land, while straight-line is for buildings.

The declining balance method results in higher depreciation in early years, while straight-line depreciation spreads costs evenly over time.

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