Depreciation and Asset Types Quiz

What is the main purpose of recording depreciation on an asset?

• To increase profit

• To reflect the reduction in asset value over time

• To record the asset as a liability

• To comply with tax laws

Tangible assets are:

• Assets that cannot be seen but have economic value

• Assets that can be physically touched and used in business operations

• Long-term investments

• Net working capital

Which of the following is NOT an example of an intangible asset?

• Business license

• Computer

• Copyright

• Goodwill

The straight-line method of depreciation means:

• Depreciation is calculated on a fixed rate of the book value

• Depreciation changes every year

• The depreciation amount is the same each year over the useful life

• No depreciation is charged

A license purchased for 5 years is classified as:

• Current liability

• Current asset

• Tangible fixed asset

• Intangible asset

State two differences between tangible assets and intangible assets.

Explain two common methods of depreciation and give an example for each.

A vehicle was purchased on 1 January 2023 for RM90,000. The useful life is 5 years, and the residual value is RM10,000. Calculate the annual depreciation using the straight-line method.

A company purchased a copyright worth RM60,000 for 6 years. Calculate the annual amortization and explain where it is recorded in the financial statements.

A company purchased a machine on 1 January 2022 for RM100,000. Useful life: 5 years. Residual value: RM10,000. Depreciation method: 20% reducing balance method. Required: (a) Prepare the depreciation schedule for the first 3 years. (b) State the impact if depreciation is not recorded in the financial statements.